Whether the economy is in recession remains to be seen, but the manufacturing recession continues without a doubt.

The Empire State region went back into contraction this month and the Philadelphia Fed Region is back in contraction for a second month after a one month jump higher in March.

This was the eighth negative reading in nine months for the Philadelphia region.

The Philly Fed region disappointed again this month with a reading of -1.8 vs. a Bloomberg Econoday consensus estimate of +3.0.


After popping higher in March the Philly Fed index has been dead flat since, at minus 1.6 in April and now minus 1.8 for May to point to slight contraction in the Mid-Atlantic manufacturing sector.

After jumping to 15.7 in March, new orders posted a zero in April followed now by minus 1.9 in May. And contraction in unfilled orders is deepening, at minus 8.8 vs minus 6.3 and minus 1.9 in the prior two months. Employment remains in contraction at minus 3.3 with the workweek also in contraction and at a steep minus 15.1.

Shipments are down as are inventories while confidence in the 6-month outlook is eroding, though only moderately. And price data are positive and are showing some welcome pressure, at 15.7 for inputs for a second month of solid improvement and at 14.8 for selling prices which is the best reading since October 2014.

But the bulk of this report is a disappointment and follows even greater weakness in Monday’s Empire State report. The factory sector continues to stumble along, not yet showing much benefit from the falling dollar, which boosts exports, nor the rebound in oil prices which should eventually boost energy spending.

Recent History

The Philadelphia Fed manufacturing index has been showing some resilience this year but less than the Empire State report. The Philly measure in April inched back into contraction at minus 1.6 but a move back to positive ground is expected for May, at an Econoday consensus of plus 3.0. But new orders, at zero, showed no change in April while backlog orders fell into deeper contraction at minus 6.3. But May is a new month, giving time for improvement in exports (based on the decline in the dollar) and also for energy equipment (based on higher oil prices).

Philly Fed Index

Philly Fed 2016-05A

Six month look ahead expectations have been ridiculously optimistic for years.

Also note the Empire State Manufacturing Index Crashes After Back to Back Gains.

Mike “Mish” Shedlock