CHART OF THE DAY: Manufacturers haven’t been this optimistic in over a decade

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The outlook for general business conditions six months forward in the Philadelphia Fed’s monthly Business Outlook Survey hit its highest level in over a decade this month.

The forward outlook index rose to 60.8 in October from 58.2 in September. The last time it was this high was in September 2003.

Here’s what the Philadelphia Fed had to say in the release:

The survey’s future indicators have suggested markedly improved optimism among the reporting manufacturers in recent months. The future general activity index increased 3 points, from 58.2 to 60.8, exceeding its previous highs since the end of the recession in 2009 (see Chart).

Philly Fed Outlook

Slightly over 63 percent of firms expect increases in activity over the next six months; only 2 percent of firms indicated that they expect decreases over the next six months. The indexes for future new orders and shipments also remained at relatively high levels. Over 67 percent of firms expect increases in new orders and 57 percent of firms expect increases in shipments over the next six months. The future employment index fell 4 points; however, nearly 37 percent of the firms expect to increase employment over the next six months.

The Philly Fed survey gauges manufacturing activity in eastern Pennsylvania, southern New Jersey, and Delaware.

Goldman Sachs economist Jan Hatzius considers it one of the best predictors of overall U.S. economic growth.

Citi’s Peter D’Antonio disagrees.

“In the absence of data we caution against looking at the Philly survey, as it is notoriously erratic and poorly correlated with actual activity, in our view,” wrote D’Antonio in a preview of the release.

For the economy’s sake, let’s hope D’Antonio is wrong.

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