Philadelphia Fed manufacturing sentiment recovers in July, index rises 21.5 points

The Philadelphia Fed business sentiment rose in July. The headline general business conditions rose 21.5 points to 21.8 in July – its highest reading since July 2018 and at the lower end of the range of readings that prevailed in the period of strong manufacturing activity in 2017 and 2018. The consensus expectations were for a rise to 5. Today’s reading seems to stand out in relation to available readings through June for the ISM manufacturing index, which is usually more reliable and has much wider geographic coverage.

The recovery in the general business conditions index was widespread throughout components. The index of new orders rose 10.6 points to 18.9, the index for the number of employees rose 14.6 points to 30. Meanwhile the shipments index rose 8.3 points to 24.9 and the prices paid index rose to 16.1. Survey responses appear to indicate towards a moderate intensification of supply pressures, on balance.

The forward-looking components of the survey also recovered markedly in July, with respondents expecting more substantial growth of activity in the next six months. The index of expected general business conditions rose 16.6 points to 38. Respondents also seem to expect a deepening of input price pressures, with the index of prices paid in six months rising 5.1 points to 35.3. The rebound in forward-looking sentiment shows the rebounded tenor of the data flow since June, which shows ongoing strength in household demand and, at least for the time being, some diminution of recessionary risks, said Barclays in a research report.

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