After last month’s prints where the Empire Manufacturing and Philly Fed reports moved in separate directions, the June reports for both surveys converged with each other. Let’s start with the Empire Manufacturing report. In May’s report, the headline index dropped to negative territory for the first time since October, but in June it rebounded in a big way, rising to a level of 19.8 compared to expectations for a reading of 5.0. So how does that stack up? Relative to expectations, it was the biggest beat since October 2009. On its own, it was the best reading since September 2014, and in terms of m/m increases, it was the 2nd largest jump in the history of the survey (since 2001) trailing only May 2003. That’s pretty impressive!
Looking at the internals of the report, breadth was generally positive with nine components increasing and just three declining. Areas of strength came in New Orders and Shipments, while Number of Employees, Delivery Times, and Prices Paid were the only decliners. While current conditions in the Empire Manufacturing report were positive, expectations were a bit more subdued as every component except New Orders declined.
Heading south down to Philadelphia, in last month’s Philly Fed report, general business conditions actually increased, but in this month’s report it edged down from 38.8 to 27.6. That was still good enough to beat consensus expectations of 24.9 and is much closer to the highs rather than the lows of the cycle.
As far as the internals of the Philly Fed were concerned, along with General Business conditions, respondents saw a sizable decline in Shipments and just minor declines in the Number of Employees and Average Workweek. This month’s Philly Fed report also asked respondents how they expect production in Q2 to compare to Q1. 60.3% or respondents see production increasing, with more than half citing improved business conditions, while just 17.2% expect production to decline and only a small percentage of them cited business conditions as the reason for production declines. All in all, conditions in the Philadelphia region remain positive.