US Philly Fed index strong in September, but strength to soon be tested
By Alexander Bueso
Date: Thursday 19 Sep 2019
(Sharecast News) - Manufacturing sector activity in the US mid-Atlantic region remained stronger than expected in September, but that resilience was likely to soon be tested and should not be extrapolated to the remainder of the country, economists said.
The Federal Reserve bank of Philadelphia's headline factory sector index slipped from August's level of 16.8 to 12.0 (consensus: 10.8).
Nonetheless, the key subindices tracking new orders, hiring, and prices paid appeared to point in exactly the opposite direction.
The former of those, the most important of the three, was in fact little changed at a relatively high level of 24.8, versus 25.8 for the prior month.
Price pressures increased significantly alongside, with the corresponding gauge jumping from 12.8 to 33.0.
Hiring also strengthened, with the sub-index linked to the number of employees at companies rising from 3.6 to 15.8.
And firms lengthened their shifts, with the sub-index measuring average employee workweeks increasing from 6.8 to 13.0.
"As a result, the average level of the five subindexes with equivalents in the ISM manufacturing index rose to a 16-month high. In recent years, this measure has tracked the ISM quite closely, but the Philly numbers have hugely outperformed since late winter, said Ian Shepherdson at Pantheon Macroeconomics.
"We assume this is because firms in the Philly area are less exposed to trade with China than the average respondent to the ISM survey, though we can't be sure. We think the gap will narrow somewhat when the tariffs on consumer goods work through, hitting real incomes and triggering a broad-based slowdown in growth."
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