Today’s Philly Fed Manufacturing report for the month of August came in right inline with consensus expectations at a level of +2.0, but the internals of the report were pretty weak. Let’s start with the headline index. In June, the headline reading came out of negative territory for the first time in nine months only to fall back into negative territory in July, so this month’s rebound north of neutral is definitely welcome.
Turning to the internals of this month’s report, breadth was weak with just three sub-components showing m/m increases while six declined. On the upside, categories that increased showed just relatively modest moves, while some of the categories that showed declines saw much larger moves. New Orders, for example, dropped from +11.8 down to -7.2; that was the largest monthly decline since June 2012. Another lowlight of this month’s report was the Number of Employees index, which dropped 18.4 points to -20.0. The last time this component was lower was coming out of the recession in July 2009. It was also the eighth straight month of negative readings, which is also a streak that hasn’t been seen since the economy was coming out of the last recession. So while Jobless Claims nationally are painting a positive picture of the employment situation,manufacturing employment within the Philadelphia Fed’s district is not nearly as rosy.