Introducing the Philadelphia Fed Nonmanufacturing Survey

To assess the health of the economy, it sometimes helps to look beyond the numbers and listen directly to business managers. That is why the Federal Reserve Bank of Philadelphia and a handful of other regional Reserve Banks and private firms such as the Institute for Supply Management conduct a variety of monthly surveys of business activity. Such qualitative surveys offer the advantage of providing timelier insight into economic activity prior to the official monthly employment and quarterly gross domestic product data releases as well as insight into regional and local trends. And now economy-watchers have a new survey in their toolkits: To complement our Manufacturing Business Outlook Survey — the nation’s oldest regional manufacturing survey — the Philadelphia Fed has introduced a survey of nonmanufacturing firms in Pennsylvania, New Jersey, and Delaware called the Federal Reserve Bank of Philadelphia Nonmanufacturing Business Outlook Survey.¹

Surveys gather “soft” data in the form of responses from business owners, executives, and managers. These sometimes-subjective responses supplement or confirm the signals being sent by the hard numbers — say, the dollar value of exports or the average number of hours worked per employee — that economists use to measure the performance of a sector, region, or country. Despite their qualitative nature, manufacturing survey results tend to be tightly correlated with overall economic conditions. This close relationship between movements in manufacturing survey results and movements in aggregate economic data means the survey results are closely watched not only by economic forecasters but also by investors and the news media. Although little research has been done on the correlation between nonmanufacturing surveys and the ups and downs of the overall economy, the long-term shift from manufacturing to services as the main driver of U.S. economic growth may make nonmanufacturing surveys increasingly valuable for gaining a fuller picture of the economy.

This article appeared in the Third Quarter 2014 edition of Business Review. Download and read the full issue.

^[1]Formerly named simply the Business Outlook Survey, our manufacturing survey is now formally called the Manufacturing Business Outlook Survey (MBOS) to differentiate it from our new Nonmanufacturing Business Outlook Survey (NBOS).