U.S. Philadelphia Fed manufacturing survey rebounds in January

The U.S. Philadelphia Fed manufacturing survey recovered in January after having fallen at the tail of 2018, signalling that forward-looking surveys through December might overstate the degree that manufacturing activity is expected to decelerate in the months ahead, said Barclays in a research report.

The general business conditions index rose 7.9 points to 17, the highest since October. However, it is slightly below the elevated range it had occupied from end-2016 through the first half of 2018. The January print was above consensus expectations. Looking at components, the recovery in general business activity was mainly seen in new orders, which rose 8 points to 21.3. Readings for other components were not nearly as positive, with the indices for shipments, employees and respondents’ inventories all remaining in line with decelerating growth.

The latest responses paint a more mixed picture of production and cost pressures than releases at the tail end of 2018, with the index of delivery times indicating towards lingering production bottlenecks, but the index of prices dropped slightly on the heels of the recent steep fall in the price of crude oil.

In the meantime, the six-month-ahead measures from the survey point to some modest rebound in expectations for activity in the latter half of 2019. The index of expected general business conditions in six months rose 1.3 points to 31.7, retracing some of the cumulative fall since August, and situated strongly in the range in line with continued growth.

“Meanwhile, January’s responses show a sharp shift in the number of respondents who expect upstream pricing pressures to intensify in the coming quarters, with the indicator of expected input prices six months hence tumbling 30pts to 39.9 – back to the mildly elevated range that had prevailed prior to mid-2017”, added Barclays.

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