Phila Fed Index tends to provide a perspective into the strength of economy

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The Philadelphia Fed index tends to provide a great perspective into the strength of the economy, from which the market will be influenced. As can be seen from the charts below, the seasonal profiles of the economic indicator and the S&P 500 are virtually identical, with peaks and troughs matching almost perfectly. Thus far in 2012, the market has not seen the typical downturn in manufacturing activity in the first quarter. Instead the indicator has been grinding higher with the market, producing better than average seasonal results. Today’s Philly Fed report will be key. If the index ticks down significantly, as a number of other manufacturing gauges have indicated in recent days/weeks, economic strength may not be as strong as what equity markets are pricing, suggesting that the markets may come under negative pressures, similar to the economic activity. If the index is strong and shows no discernible decline, bucking the recent trend of rather disappointing US manufacturing reports, higher equity values may be supported based on the backdrop of strong economic fundamentals.


Similar peaks and troughs of the economic indicator compared with the S&P 500 in the seasonal profiles.



Today, the Federal Reserve Bank of Philadelphia’s general economic index decreased to 8.5, the lowest level since January, from 12.5 in March. Economists forecast the gauge would dip to 12, according to the median estimate in a Bloomberg News survey.

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