The Philadelphia Federal Reserve's non-manufacturing index jumped to 7.4 in July 2025, swinging from a deeply negative reading of -25.8 in June. It's the first time the gauge has landed in positive territory since October 2024.
What the index measures
The index tracks business conditions across a range of service-sector firms in the Philadelphia region. A reading above zero signals expansion; below zero means contraction. The June figure of -25.8 pointed to a sharp downturn. July's 7.4 suggests the sector has moved back into growth mode.
Why the jump matters
The 33.2-point swing is the largest month-over-month improvement in the index's recent history. While the Fed doesn't provide a breakdown of subcomponents in this release, the headline number alone signals a notable shift in sentiment among regional service companies. The last positive reading, in October 2024, was 2.1.
The non-manufacturing index had been negative for nine consecutive months before July. That streak included a low of -32.4 in April 2025. The July rebound brings the index back to levels last seen in late 2024, though still well below the 20-plus readings common in 2023. The data comes from a survey of about 100 firms in the Philadelphia Fed's district.
Economists watch this index closely because it's one of the earliest monthly reads on regional service-sector health. The July number suggests the drag on non-manufacturing activity may be easing, but one month doesn't make a trend. The next reading, due in August, will show whether the improvement holds.
