The Philadelphia Fed's manufacturing sector is doing better than other regional sectors based on the general conditions index which, though slowing by 11 points in May, is still in the plus column at 4.5. This is the fourth positive reading in a row and compares with a sweep of negatives across the four other regional Fed indexes over this period.

Yet May's details definitely show slowing compared to April: new orders down more than 20 points and in the negative column at minus 7.9, unfilled orders down more than 12 points at minus 11.5, and employment down nearly 19 points at minus 7.9. The general 12-month outlook remains favorable at 32.4 and is little changed from April's 34.3 but another month of slowing orders could see June's headline index sinking back into the negative column.

May's price data are mixed with prices paid cooling by more than 4 points to 18.7 but prices received edging more than a point higher to 6.6. Yet the 6-month outlook for prices point to moderating inflation expectations as fewer respondents see prices, whether paid or received, increasing over this period.

This report's headline did miss Econoday's consensus median but not by much. Still, at minus 13 overall on the Relative Performance Index and at a noticeably deep minus 35 when excluding inflation data, US economic data continue to miss forecasts.

The Philadelphia Fed manufacturing index in May is expected at 7.8 versus April's 15.5 which, for a third report in a row, was better than expected and highlighted by a jump in new orders.

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.

Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. By tracking economic data such as the Philly Fed survey, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth so that it won't lead to inflation. The Philly Fed survey gives a detailed look at the manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on market behavior. Some of the Philly Fed sub-indexes also provide insight on commodity prices and other clues on inflation. The bond market is highly sensitive to this report because it is released early in the month and is available before other important indicators.