The Philadelphia Federal Reserve reports that its manufacturing index hit a four-month high of 16.6 in May, well above the reading of 8.5 seen in April as well as the expected figure of only 9. Based on the data, it’s possible that inventories are finally unwinding after being stockpiled throughout the ongoing trade war, a view also supported by the recent NY Fed manufacturing report.
Key Takeaways
- The manufacturing index was predicted to rise by only 0.5 points vs. the true increase of 10.1.
- Shipments rose while new orders decline in the month of May. Inventories sunk into negative territory.
- Prices received hit a 17-month low.
The index rose to 16.6, with anything above 0 showing growth. The employment index rose 4 points to 18.2, a 5-month high. The average workweek saw a slight dip from 11.2 to 10.9. Prices received dropped 3 points to 17.5, the lowest reading in almost 1.5 years.
Inventories dropped to negative territory as stockpiled goods unwound, perhaps due to changing conditions in the trade war between the US and China. Shipments increased from 18.4 to 27.6 while new orders decreased from 15.7 to 11.
Manufacturing has had a rocky year with the trade war seriously impacting the industry. Industrial production dropped to a two-year low in April according to a report released on Wednesday, although the Empire State manufacturing index hit a 6-month high.
The shipments index jumped to 27.6 in May from 18.4 in April, although the reading for new orders slid to 11.0 from 15.7.
Solid Philly Fed follows up a good NY Fed print. May manufacturing data picked up. The shift from imports to domestic production is showing up in the data. Weekly claims also drifted lower. Some economic data to get things going on this lovely sunny Thursday. @realDonaldTrump
— Marco Mazzocco, CFA (@MarcoMNYC) May 16, 2019
Market Reaction
Gold has ticked upwards following the strong manufacturing report. Spot gold last traded at $1,297.14/oz.
Gold Price Chart
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