Highlights
Business conditions are improving for Mid-Atlantic manufacturers but only gradually. The Philadelphia Fed's general business index came at 11.5 in October, safely above the break-even zero level but indicating a slower rate of month-to-month increase compared to September's 14.1 level. But new orders did accelerate slightly, to 6.2 vs. 3.3 in September in a reading that points to extended overall improvement in business conditions for the months ahead.

Shipments, at 3.3, increased in the month but at a slower rate than September when the reading was 8.2. The modest level of shipping isn't increasing the need for manufacturers to add new hands and feet as the employment index, at minus 6.8, shows month-to-month contraction once again. Employees are a major cost for manufacturers as are inventories which continue to contract and at a much more severe rate, at minus 31.8 vs. minus 18.1 in September. The minus 31.8 reading, together with a negative reading in the inventories index of the Empire State report which was released earlier this morning, put into question the improvement recorded in the ISM's manufacturing report for September that indicated firms were beginning to shift into restocking mode. Delivery times in the Philadelphia report continue to speed up, at minus 9.3 vs. minus 8.9, to indicate slack conditions in the supply chain. Both the Philadelphia and Empire State reports show tangible rates of input inflation along with continuing contraction for output prices, a mix that's bad for profits but good for the overall inflation picture.

Though mostly positive, this report definitely has material for the bears including the six-month outlook where optimism is fading just a bit, to 39.8 for an 8 point drop. Stocks are slipping but only very slightly in reaction to the report. Indications are mixed for October's ISM manufacturing report, with this report pointing to no further gains in contrast to the Empire State report that is pointing to significant gains.

Market Consensus Before Announcement
The general business conditions component of the Philadelphia Fed's business outlook survey index rose solidly to 14.1 for September from 4.2 in August. But we could get some slippage in October as the new orders index eased to 3.3 from 4.2 in August.

2009 Release Schedule

Released On: 1/15 2/19 3/19 4/16 5/21 6/18 7/16 8/20 9/17 10/15 11/19 12/17 Released For: Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec