Sharp upside surprise in November Philly Fed index

The Federal Reserve Bank of Philadelphia's factory sector index jumped from 23.8 in October to 39.0 for November.

Economists had penciled-in a decline to 22.0.

Supply chain problems worsened a bit more, as reflected in the sub-index for delivery times, which rose from 32.2 to 35.7.

Price pressures continued to build as well, with the sub-index tracking the prices paid by firms jumping from 70.3 to 80.0.

Yet as Ian Shepherdson, chief economist at Pantheon Macroeconomics pointed out, the sub-index for delivery times remained below its spring peak, while the jump in prices paid was likely due in large part to that in oil prices.

Furthermore, the key sub-index linked to new orders leaped from 30.8 to 47.4 - reaching its highest level since March 1973 - and companies took on workers at a faster pace than in the month before.

"The Philly index is much stronger than implied by China’s Caixin manufacturing PMI, which usually leads it by a couple months," Shepherdson said.

"Presumably, the combination of strong demand, fuelled by much more aggressive stimulus than in China, is supporting the Philly Fed and other U.S. industrial surveys. Also, China’s pursuit of zero Covid is disrupting activity."

"[...] Still, these numbers all suggest that supply chain pressures remain intense, but we expect to see a clear improvement over the next few months as chip supply rises and port logjams ease."