by Calculated Risk on 7/17/2008 10:16:00 AM

Here is the Philadelphia Fed Index for July activity released today: Business Outlook Survey.

Here are a couple key point:

Manufacturing is contracting, but not getting crushed like in previous recessions. This is helping to keep the unemployment rate from rising too quickly.

Prices are rising. "The prices paid index increased six points, to 75.6, its highest reading since March 1980."

Click on graph for larger image in new window.

This graph shows the Philly index vs. recessions for the last 40 years. There were a times the index was this low without a recession - so the reading today doesn't mean the economy is in recession. However it is very likely that the economy is already in recession.

From the release, weaker conditions and higher prices :

Indicators Reflect Continued Weakening

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged slightly higher, from -17.1 in June to -16.3 this month. The index has now been negative for eight consecutive months. Other broad indicators remained negative and little changed. The survey’s new orders index was essentially unchanged at -12.1, and the current shipments index decreased one point, from -6.7 in June to -8.0 this month. Indexes for unfilled orders and delivery times, already negative, declined six points and three points, respectively.

Indicators for employment and hours worked were consistent with negative readings in other broad indicators. The current employment index declined from -6.9 in June to -7.3, its sixth negative reading in seven months. The percentage of firms reporting a decrease in employment (24 percent) exceeded the percentage reporting an increase (17 percent). The average workweek index fell four points; it has now been negative for seven consecutive months.

Manufacturers Continue To Report Price Pressures

A larger share of firms — 77 percent, up from 72 percent in June — reported higher input prices this month. The prices paid index increased six points, to 75.6, its highest reading since March 1980.