Philadelphia Fed manufacturing report
Manufacturing activity in the Philadelphia area rose to its strongest pace since September as signs of a snapback drove several component pieces higher. Perhaps the index most likely to draw attention within today’s report is the Prices Paid component, advancing by 12.0 points for a second month in a row to reach 35.0 and its highest since July 2011.
The Prices Received index on the other hand softened to 14.1 from 17.0 yet remains higher than its six-month average of 8.7. The readings are obviously worth watching in coming months yet are unlikely to shift the Fed’s inflation assessment to deviate from its 1.6% to 2.0% range in coming years. In its recent FOMC policy statement the Fed admitted that inflation was largely developing as it has been predicted and sees little sign of any overshoot or threat. So for now, we have to take the prices paid component as a sideshow of rebounding activity.
On that front there was no shortage of action in the latest report. The New Orders index rebounded to 16.8 in June from 10.5, while the Shipments index advanced to 15.5 from 14.2. Also encouraging was a burst higher in the Unfilled Orders index, suggesting that businesses are starting to have a hard time with resurgent orders. How long such bottlenecks last remains to be seen, but this is a healthy outcome.
Manufacturers also dug into inventories in order to meet current demand. The Employment gauge surged to 11.9 from 7.8 while the Average Workweek lengthened to 7.3 from 2.9. In each case the index rose to record its strongest performance since October. Finally, the six-month forward outlook advanced to 52.0 from 37.4 to reach an eight-month high. Overall, the latest manufacturing report looks pretty healthy.
Chart: Prices paid index surges again