|Philadelphia Fed Survey|
Yesterday's news on April manufacturing shipments in the industrial production report showed contraction, as did yesterday's Empire State data on this month's conditions in the New York manufacturing region. And showing sizable contraction is today's manufacturing report on the Mid-Atlantic region where the Philly Fed's index, after two months in the positive zone, fell back to minus 5.2 this month.
New orders are not a strength for Mid-Atlantic manufacturers, at minus 7.9 to indicate deepening monthly contraction from April's minus 1.0 reading. Unfilled orders, at minus 9.3, also show sizable contraction as does employment, at minus 6.8. Shipments, at minus 8.5, are also in contraction this month.
Though the Philly Fed report, and to a lesser degree the Empire State report, have been showing consistently weaker conditions than reports on the national manufacturing sector, these reports nevertheless are warning signals for May. The manufacturing is apparently in a soft spot, though expectations in the sector point to improvement through the year, evident in the Philly Fed's six-month outlook which, despite all the weakness in May, is up a very sharp 12.8 points to a very respectable 32.3. The Dow is moving to opening lows following today's report.
Market Consensus before announcement
The general business conditions index of the Philadelphia Fed's Business Outlook Survey was flat in April. The Philly Fed's composite index came in marginally above zero, at plus 1.3 to show minimal monthly growth. The reading was little changed from March's plus 2.0. But outside of the shipments component, which was moderately positive at plus 9.1, there was little strength in the report. New orders were essentially flat at minus 1.0 versus March's plus 0.5, and employment turned down with a reading of minus 6.8, compared to plus 2.7 last month.
The general conditions index from this business outlook survey is a diffusion index of manufacturing conditions within the Philadelphia Federal Reserve district. This survey, widely followed as an indicator of manufacturing sector trends, is correlated with the ISM manufacturing index and the index of industrial production. Why Investors Care