Economy and Confidence
75warm
Now 20.9 | Data for Oct 2026
Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.
What it is
Each month the Federal Reserve Bank of Philadelphia asks manufacturers in its district about business conditions: the share seeing improvement minus the share seeing deterioration. Above zero means expansion.
One of the earliest manufacturing surveys published each month, it often turns before official production data.
Public substituteWe use this in place of “Purchasing managers’ indices (ISM, S&P Global)”. PMIs use 50 as the line between better and worse and cover many countries; the Philadelphia Fed survey uses 0 as the line and covers only manufacturers in its district (eastern Pennsylvania, southern New Jersey and Delaware); OECD business confidence combines official business surveys from many countries. All three tend to point the same way, but their scope and numbers differ. They measure similar things, but they are not the same number.
Share answering “better” minus share answering “worse”; above 0 = expansion.
Where it stands now
coldcoolneutralwarmhotHatched = earlier periods that were also warm
When it was here before
US stocks after it began, cumulative1 yr2 yr3 yr
For each period, the changes 1, 2 and 3 years after it began are cumulative and measured from its first month; “What happened next” is measured from every warm month, so the two give different numbers. The events named beside each period are major events of that time, not necessarily related to the readings here.
What happened next
Bars: median cumulative changeEarlier months with Philly Fed warm, excluding the current period (117)All months (583)
Median of the deepest drop below the starting month within the next 5 years: −2.3% for months with Philly Fed warm; −3.7% for all months.
The warm months come from a small number of market episodes (12), and neighboring months are not independent events; rises and falls are all listed. This is the historical record, not a forecast. “US stocks” means the S&P 500 price index compiled by Professor Shiller (monthly average, excluding dividends).
| Median position | Back to neutral (40–60) | Still warm or more extreme | |
|---|---|---|---|
| 1 yr later | 41neutral | 29% | 24% |
| 3 yr later | 49neutral | 21% | 36% |
| 5 yr later | 48neutral | 26% | 32% |
Has hot or cold lined up with later returns?
1978–2021: average yearly change in US stocks over the next 5 years
There is no clear relationship between hot or cold and what came next. The gaps between the bars are not consistent across months (rank correlation below 0.25); this is a record of the past, not a forecast.
What it is linked to
Philly FedtoIndustrial outputCommon explanation: Knock-on · same direction
The new orders and shipments that manufacturers report lead actual production
This issue: Philly Fed at 75 (warm), Industrial output at 61 (warm) — both above normal, in line with the common explanation.
Supported by the dataAgreement +0.45 · in step in 10 of 10 5-year periods
Philly FedtoLeading indexCommon explanation: Knock-on · same direction
Business surveys are among the earliest signals of where the economy is heading
This issue: Philly Fed at 75 (warm), Leading index at 42 (neutral) — at least one is in the neutral range (40–60), so we make no call this issue.
Weak or inconsistentAgreement +0.31 · in step in 42 of 44 5-year periods
Values
Data and sources