The Philly Fed Index Turns 50 with Steadfast Success

This year, the Federal Reserve Bank of Philadelphia is celebrating the 50th anniversary of its monthly Manufacturing Business Outlook Survey (MBOS). The MBOS queries high-level business executives in the Third Federal Reserve District, covering eastern Pennsylvania, southern New Jersey, and Delaware, on the direction of change in business activity. It is the longest-running manufacturing survey compiled by a regional Federal Reserve Bank. Not only has the survey provided valuable information on business cycle swings regionally, it is quite sensitive to shifts in national activity. As such, it has been remarkably successful in providing current-period forecasts of key U.S. economic indicators before official quantitative statistics are published. Consequently, economists, investors, and the media carefully watch the survey. Historically, the MBOS has even moved markets, particularly in times of uncertainty when the stock market has been highly volatile.

The MBOS, formerly known as the Business Outlook Survey, began as a joint effort of economists in the Research Department of the Philadelphia Fed and the Bell Telephone Company of Pennsylvania in Philadelphia as a way to measure local economic activity.¹ Dr. Edward Boehne, a newly hired economist at the Philadelphia Fed, authored the early memos spelling out the objectives and planning of the survey. He was particularly insightful to plan the report release date to coincide with the month being surveyed. Boehne eventually became Research Director and later President of the Philadelphia Fed. In its early years, the survey was mailed out in the beginning of the month to regional manufacturing executives. The resulting report on expectations of business conditions was then mailed mid-month by the Philadelphia Fed to any interested parties. Over time, as the MBOS gained in popularity, the survey was conducted by phone, and a “hotline” was established with pre-recorded results. With technological advances, data gathering and release finally went online, with results of the survey typically published on the third Thursday of the month.

This article appeared in the Fourth Quarter 2018 edition of Economic Insights. Download and read the full issue.

^[1]For a short period of time, the Cleveland Fed constructed a similar survey for the western portion of Pennsylvania.