After Tuesday’s weaker than expected Empire Manufacturing report which brought the headline index for that survey into negative territory, the Philadelphia Fed Manufacturing report followed New York’s lead and came in weaker than expected and into negative territory. While economists were expecting the headline index to come in at a level of +6.5, the actual reading came in at negative 6.0. The last time we saw a reading this low in the headline index was back in February 2013. One noteworthy aspect of the report came in the commentary, where it was noted that “Evidence suggests that the responses regarding general activity that were received earlier in the month may have been negatively affected by the volatility in the stock market and international news reports.”
The table to the right shows the breakdown of this month’s report with the m/m change in each component. As shown, it was the headline index which actually saw the largest decline. After that, we also saw sizable declines in Prices Paid and Unfilled Orders. On the upside, employment was generally positive with a big increase in number of employees (partially offset by a decline in average workweek) and New Orders. On a final note, one of this month’s special questions in the Philly Fed Manufacturing report asked respondents whether total production for the third quarter would be more or less than the second quarter. In total 45.9% reported increases in production while 41.9% reported declines. Overall, while the headline number of the September Philly Fed report showed a big negative reversal, digging a little deeper it was not quite as bad as it initially appeared.