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[align=left]Philadelphia Fed Res report released today....[/align]
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Philadelphia Fed Survey
class=econo-sectiontitleDefinition
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
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Actual
-2.2
Consensus
10.0
Consensus Range
1.3 to 16.0
class=econo-sectiontitleHighlights
The Philadelphia Federal Reserve's manufacturing survey showed weakness, not strength like yesterday's industrial production and Empire State reports.
The Philly's Fed's business activity index fell to -2.2 in June vs. an already soft 7.3 in May. This is the first negative reading in more than two years.
New orders fell sharply, to 2.5 vs. 15.0 and pointing to softening activity in future months.
Prices paid fell back to 23.5 vs. 30.9 while prices received dipped to 8.1 vs. 15.7, both consistent with slowing conditions.
But employment readings were positive, with the index rising to 7.1 vs. 5.4. Still, slowing conditions, if not contracting conditions, will not inspire manufacturers to add new employees. Yet in a special question in the survey, a large 43% of respondents expect to add employees over the next six to 12 months against only 11% expecting cut backs.
Two readings on the supply chain clearly show slowing: delivery times improved sharply to -13.2 vs. 0.5 while inventories declined to -0.4 vs. 2.0.
This report falls directly in line with the ISM's national purchasing survey which has been decelerating sharply in recent months and itself is on the verge of a contractionary reading.
Is the manufacturing sector now shrinking? Is the robust two-year recovery in the sector dead? Again, the readings are mixed. But this survey is unusually robust, with a large sample and a long history. Nevertheless, the Federal Reserve's industrial production report is telling a different story.
Bonds firmed and the dollar weakened in reaction to the Philly data, which will likely prove a negative for the stock market through the afternoon. [/align]
Market Consensus Before Announcement
In contrast to the Empire State Survey, the Philadelphia Fed's business outlook survey moderated in May to 7.3 but it did not drop below zero. Still, it appears that manufacturing activity may be moderating in this Fed region.
Philadelphia Fed survey Consensus Forecast for June 05: 10
Range: 1.3 to 16
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