Economists were excited last month when the Philadelphia Fed manufacturing region index broke into positive territory.

Economists expected a continuation (as they invariably do whenever there is good news). Instead, the index is back in contraction with a huge plunge in shipments.

The Blooomberg Econoday consensus for the Philly Fed Manufacturing Index was +9 in a range of +5 to +15. The reported number was -1.6, well below the lowest prediction of +5.


After emerging in March from a long run of negative readings, the Philly Fed manufacturing index edged back into contraction, at minus 1.6 in April. New orders are at zero which indicates no change from March. Deeper contraction is the score for backlog orders which fell to minus 6.3 from March’s minus 1.9. Shipments, after spiking to plus 22.1 in March, plunged to minus 10.8 in today’s report in a general reminder that anecdotal surveys are subject to wide monthly swings, the result of low sample sizes. Employment fell steeply and inventories continue to contract in a telling sign that businesses are guarded on the outlook. Prices paid in this report, which have been soft, bounced on the month’s rise oil. This report does not confirm April strength in the manufacturing sector as indicated last week in the Empire State report. The next early indication on the April manufacturing sector will be tomorrow with the PMI flash.

Recent History

At an expected 9.0, the Philadelphia Fed manufacturing index is expected to extend March’s move into positive territory. A solid report would confirm April strength in the Empire State report and raise the possibility that the factory sector is beginning to get a lift from the lower dollar and from higher oil prices. New orders and shipments showed a sudden burst of life in the March report.

Mike “Mish” Shedlock