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US: Philadelphia Fed Manufacturing Index
| Consensus | Consensus Range | Actual | Previous | |
| Index | 15.0 | 12.0 to 20.0 | -0.4 | 26.7 |
Highlights
In a surprisingly weak reading, the US Philadelphia Fed manufacturing general business conditions index misses expectations as it shows modest contraction at minus 0.4 in May, well down from 26.7 in April and 18.1 in March.
Forecasters were looking for slower growth but continued expansion at 15.0 in May with forecasts ranging from 12.0 to 20.0. The May decline follows four consecutive months of expansion.
Contributing to the slowdown in business activity: the key forward-looking subindex, new orders, falls back to minus 1.7 from a very expansionary 33.0 in April and from 8.6 in March. Shipments is also down a lot at 4.9 from 34.0. Employment comes at minus 2.8 versus minus 5.1.
On the somewhat positive side, prices paid falls to 47.9 from 59.3 but that is still a very elevated reading. Prices received are at 26.3 versus 33.5 in April.
Also rather remarkable on the plus side, 6-month expectations for business activity rises to 53.2 in May from 40.8 in April. This is the highest for expectations since June 2021.
Market Consensus Before Announcement
A retreat to a moderate 15.0 figure is the call, down from 26.7 in April and 18.1 in March.
Definition
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.
Description
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.