In an unfortunate and stark contrast to the Empire State report, the regional manufacturing report from the Philly Fed points to contraction this month. The business activity index is negative, at minus 5.8 vs plus 8.5 in April. New orders are in the negative ground as is employment. Delivery times shortened dramatically to indicate slowing activity in the supply chain. Inventory accumulation slowed, unfilled orders contracted deeply, and optimism in the six-month outlook is down noticeably. Price readings also point to easing demand, with input costs little changed and prices received contracting.
One positive in the report is the shipment index which shows a slight monthly increase underway. But otherwise this report is filled with negatives, which again are readings that point, not to slowing, but to an actual step backwards. But this is just one report and hopefully the weakness will be brief and isolated to the Mid-Atlantic area. The contrast between this report and Tuesday's mostly strong Empire State report puts special focus on the next regional manufacturing survey, that is next week's report on Tuesday from the Richmond Fed.