The Philadelphia Fed released a report on Thursday stating that its manufacturing index for April dropped from 13.7 in March to 8.5 in March, now entering single digits and heading toward a contraction.
Key Takeaways
- The Philly Fed Manufacturing Index was expected to contract, but still underperformed with a drop from 13.7 to 8.5 vs 11 expected.
- The index rose to 32.3 last year but has seen continuous decline since then with the trade war and a global economic slowdown impacting manufacturing.
- The index on the outlook for future activity dropped below a 3-year low.
While a figure above zero shows positive growth, the steady decline in the key manufacturing index is a concern to many analysts.
The new orders index rose from 14 to 15.7, but current shipments dropped 2 points and delivery times dipped into negative territory for the first time in over 2 years. The current inventory index plummeted 15 points to 2.6, barely above a negative reading. The outlook for future activity dropped to 19.1, the lowest point in 30 months.
Jobless claims down 5k to 192k (est. 205k)
Retail sales up 1.6% (est. up 1%)
Philly Fed manufacturing index down to 8.5 (est. 11.0)— Brian Cheung (@bcheungz) April 18, 2019
Current Indicators, Positive But Mixed
The manufacturing index dropped to 8.5. Some other indicators were positive but with mixed movements – the new orders index rose 14 points, firms continued to add to payrolls, and inventory dropped. 27% of firms reported increased employment, 12% reported decreased employment, and the current workweek remained positive.
Poorer Future Outlook Overall
Firms were notably less optimistic, with outlook for future activity dropping nearly 3 points. Over 39% of firms expect increases in activity while 20% expect declines. Future orders and shipments actually rose by 4 and 3 points respectively, but future prices paid and prices received saw major decline with a drop of 21 points and 7 points respectively. The future employment index dropped 10 points to 14.9, the lowest since November 2016 with firms not optimistic about hiring in the next 6 months. Future capital spending rose 11 points to 30.9.
Market Reaction
Gold is trading up 0.11% at $1,273.60/oz with a high of $1,277.64/oz and a low of $1,271.33/oz. A strong dollar, weak global economic performance, and ongoing trade protectionism policies have all had a negative effect on progress in the manufacturing industry which has been performing poorly for months.
Gold Price Chart
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