Philly Fed manufacturing index falls, while survey details remain positive

The Philly Fed manufacturing index fell to -6.0 in September, well below forecast  (6.0) and consensus expectations (5.8), while the details of the survey suggest actual activity held up. The headline measure of general business conditions in the Philly Fed survey comes from a separate survey question, instead of an aggregation of the survey components. As such, the drop in the headline index suggests regional manufacturing sentiment has soured but actual activity has not deteriorated in September. New orders actually grew (9.4, previous: 5.8) and shipments were broadly stable on the month (14.8, previous: 16.7). Furthermore, employment rose to a five-month high of 10.2 (previous: 5.3) and the average workweek continued to expand (7.0, previous: 8.5).

The ISM-adjusted version of the headline index better reflects these stable fundamentals; this measure averages five of the survey components and indicates further expansion of regional manufacturing activity in September at 51.0 (previous: 52.6). The details of the Philly Fed manufacturing survey tend to be better indicators of national manufacturing trends than the Empire State survey released earlier this week, which showed a second month of weak activity in September.

"We do not look for strength for the US manufacturing sector over the near term; however, this morning's data from the Federal Reserve Bank of Philadelphia should quell concerns that manufacturing activity has contracted sharply at the end of Q3",says Barclays.