71-Point Increase in Philly Fed Forecast Index Suggests Economic Recovery Is Now Underway

The Philadelphia Fed reports today that the Six-Month Forecast Indicators Show Continued Improvement:

Broad indicators of future activity showed significant improvement this month. The future general activity index remained positive for the sixth consecutive month and increased markedly from 47.5 in May to 60.1, its highest reading since September 2003 (see chart above). The index has now increased 71 points since its trough in December.

The indexes for future new orders and shipments each improved 12 points this month. For the second consecutive month the percentage of firms expecting employment to increase over the next six months exceeded the percentage expecting declines (21 percent versus 8 percent). The future employment index improved three points. The future workweek index increased 24 points.

MP: Notice in the chart above that in 2001 the 60-point increase in the forecast index signalled the end of the 2001 recession. Hopefully the recent 71-point increase in the future activity index since December 2008 is signalling the end of the current recession.

According to the Philadelphia Fed, "Most of the survey’s broad indicators of future activity showed continued improvement, suggesting that the region’s manufacturing executives are becoming more optimistic that a recovery in business will occur over the next six months."