Today’s Philadelphia Fed Manufacturing report was a disappointment for a number of reasons.  For starters, the headline reading came in weaker than expected, coming in at a level of 19.9 vs estimates for a reading of 29.0.  Relative to expectations, that was the biggest miss since April 2016. The other reason the report was disappointing was that it dropped below 20 for the first time since November, ending a record streak of 18 months above 20.  As shown in the chart below, and as we’ve discussed in the past, the headline Philly Fed Index reached levels that in the past haven’t been sustainable for more than a few months.  The fact that it took this long to pull back was probably the biggest surprise.

The table below breaks down this month’s report by each of the index’s subcomponents.  Weakness — or better put, slower growth — was broad-based in this month’s report as all but three sub-components saw month/month declines.  Additionally, while there were some pretty significant declines, the magnitude of the components showing gains (Shipments, Inventories, and Number or Employees) were all modest.

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