Philly Fed index turns higher in August despite weak details

A key gauge of manufacturing conditions in the Mid-Atlantic turned higher in August, even as the two most important gauges in the same report moved sharply lower.

The Federal Reserve bank of Philadelphia’s manufacturing sector index increased from a reading of -2.9 for July to 2.0.

Consensus had forecast a print of 1.3.

The sub-index tracking new orders on the other hand fell from 11.8 to -7.2, alongside a drop in that linked to the number of employees at firms in the region from -1.6 to -20.0.

Average workweeks also declined substantially, from -3.6 to -11.5.

In parallel, a gauge of prices paid by companies jumped from 9.9 to 19.7.

Similarly, a sub-index of unfilled orders slumped from 1.9 to -15.0.

"In short, this survey is largely a mirror-image of the Empire State report, where the headline index fell but the subindexes were mostly up sharply. Remember that in both surveys the headline is a measure of "general business conditions", it is not a weighted sum of the subindexes, unlike the national ISM manufacturing index.

"For now, the state of manufacturing in August is unclear, but our bet is that the modest recovery probably continues, though it likely is not accelerating," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"With the ISM-adjusted version of the index at 45.4 in August (previous: 49.9), Northeast regional manufacturing conditions are continuing to grind lower in Q3. Other regional PMI data out later this month should indicate whether this is the case across the country, or if conditions elsewhere have continued to stabilize," was the view from Barclays Research's Jesse Hurwitz.