Philly Fed: Sharp Decline in Manufacturing

Bottom Line: The Philadelphia Fed's index of manufacturing activity fell sharply, dashing hopes that last month's deceleration was just normal volatility. Nearly every major subcomponent showed slowing activity, with the index in negative territory when recalculated on an ISM-weighted basis. New and unfilled orders contracted, as the index of expectations for future orders dropped deeper into negative territory. On the plus side, the significant backlog of orders meant shipments of goods held close to recent averages. Prices paid also eased notably as supply chain bottlenecks appear to be easing. Overall, the tremendous uncertainty that manufacturers have managed for over a year is finally taking its toll as higher interest rates and inflation sap demand. More regional surveys in the coming weeks will give us a better sense of just how much slowdown (and possible contraction) we can expect at the national level.

The Philadelphia Fed Manufacturing Index FELL -9 points to -12.3, BELOW the 3-Month average of -4.33, BELOW the 6-Month average of 8 and -34.2 BELOW the year-ago level.  On an ISM-weighted basis the index FELL -8.2 points to -2.3, BELOW the 3-Month average of 9.03, BELOW the 6-Month average of 16.07 and -24 BELOW the year-ago level.