Philadelphia Fed manufacturing confidence continues to fall in October

The U.S. Philadelphia Fed business outlook survey’s general activity index dropped further in October. The index fell 6.4 points to 5.6, as compared with consensus expectations of the index to come in at 7.6. Readings in this range are usually in line with modest rises in manufacturing activity in the months ahead. The Philadelphia survey continues to show a brighter picture regarding conditions in the manufacturing sector than the ISM manufacturing index, which has dropped to levels in line with declines in manufacturing activity in August and September.

“We take more signal from the ISM, which is more representative of overall US activity than regional indices such as the Philadelphia Fed index. One bright spot from this release is that the forward-looking indicator of general business activity bounced back noticeably in October, perhaps reflecting diminished worries about trade-related tensions and perceived risks of a significant slowdown”, said Barclays in a research report.

Delving into details, the subcomponents came in slightly more positive than the headline reading. The new orders index rose 1.4 points to 26.3 and stayed slightly higher than its six-month average of 19.2. The index for the number of employees rose 17.1 points to 32.9. Meanwhile, the index for the average workweek dropped 2.2 points to 10.8, and the shipments index dropped 7.5 points to 18.9.

The forward looking components of the survey rebounded in October after having fallen off markedly in September. The index of expected general business conditions rose 13 points to 33.8.

“Respondents also expect less intensification of input price pressures than they had expected in September, with the index of prices paid in six months falling 12.5pts to 36.2 – back to the range we had been seeing since spring”, added Barclays.