Philadelphia Fed manufacturing index drops in April, in line with healthy manufacturing output growth

The Philadelphia Fed manufacturing index for the month of April dropped to 22 from 32.8 in March and 43.3 in February. The reversal of the index in April is characterized as coming back to reality, stated Barclays in a research report. However, a reading of 22 is considered quite high by historical standards. The weak data, be it business and consumer sentiment surveys or the regional manufacturing indices, had risen sharply since November 2016 that suggested some inconsistency with the underlying momentum in hard data, noted Barclays.

The hard data for the first quarter continued to show weak growth, while some of the buoyance in the soft data was expected to be reversed, said Barclays. Prices paid mainly led to the decline. Prices dropped fell to 33.7 from 40.7, while new orders and shipments dropped by similar magnitudes. Shipments and new orders also added to the overall decline that fell to 23.4 and 27.4 respectively.

On the contrary, the index for employment continued with its improvement, rising from17.5 in March to 19.9 in April. The employment index has steadily rebounded after bottoming at -4.1 in November ad October of 2016.

Overall, in Philly Fed manufacturing index stays in line with a healthy growth in manufacturing output in the region. Moreover, the slowdown in recent months appears less severe when general business conditions are indicated on an ISM-adjusted basis, added Barclays.