Philadelphia Fed non-manufacturing index swings to 22 in September after negative August reading

The Philadelphia Fed’s Nonmanufacturing Business Outlook Survey landed at 22.0 for September, a sharp reversal from August’s -8.2 reading.

To put that swing in context: a diffusion index above zero means more firms are reporting expansion than contraction. Moving from negative territory to 22.0 in a single month suggests that whatever was spooking services-sector businesses in August didn’t stick around for long.

What the numbers actually tell us

The Nonmanufacturing Business Outlook Survey, or NBOS, tracks firms across Delaware, southern New Jersey, and eastern and central Pennsylvania. These are companies outside the manufacturing world: think healthcare providers, retailers, logistics firms, restaurants, and professional services.

The survey has been running monthly since 2011, making it a well-established barometer for regional economic health in the services sector. Its diffusion indexes capture changes in general activity, new orders, sales, employment, and prices at the firm level.

September’s 22.0 reading follows a volatile stretch. July came in at 17.5, which looked solid. Then August cratered to -8.2, raising questions about whether the services economy was hitting a wall. September’s number essentially answers that question with a firm “no.”

Why this survey matters beyond Philadelphia

The Philadelphia Fed’s manufacturing survey has been a market staple for decades. Its nonmanufacturing counterpart carries similar weight for the services sector, which accounts for a far larger share of the US economy than manufacturing does.

The timing of this release adds another layer of significance. The Federal Reserve is navigating a delicate period of monetary policy calibration, and incoming data on business sentiment directly influences how policymakers think about the trajectory of interest rates. A strong services reading reduces the urgency for additional monetary easing, while a weak one does the opposite.

What to watch from here

The headline number is encouraging, but the specific breakdown of components, including new orders, employment, and prices paid, will matter more for understanding the quality of this recovery. The research notes that the specific breakdown of components has not yet been disclosed in detail, limiting insights into individual factors contributing to the rise.

Still, 22.0 is a meaningfully positive number. It suggests that a majority of nonmanufacturing firms in the region are seeing conditions improve, not just stabilize. Combined with July’s 17.5 reading, it paints a picture of a services sector that stumbled in August but didn’t fall.

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