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As has been the case with nearly every economic report for months on end, the Philly Fed Consensus Estimate disappointed to the downside.
Slow growth with weakness in orders is the common thread for both the Empire State report, released earlier this week, and now the Philly Fed where the general conditions index held little changed at 5.0 in March vs 5.2 in February. New orders, at 3.9, are not much above zero while unfilled orders are suddenly well below zero, at minus 13.8 in a sharp decline from February's plus 7.3.Philly Fed Components
Weakness in orders points to softness in shipments, which are already below zero at minus 7.8, as well as softness in employment which is struggling to stay above zero at 3.5. Price data show contraction for both inputs, at minus 3.0, and finished goods, at minus 6.4.
The early indications on March are not that positive in what would extend a series of weak months for the manufacturing sector, a sector that the FOMC noted yesterday is being hurt by weak exports tied to weak foreign demand and complicated by the strong dollar.
Let's dive into the Philly Fed Report for some charts and tables.
Shipments, unfilled orders, delivery times, inventories, prices paid, prices received, and average workweek are all negative.
Prices Paid, Prices Received
The Fed will be watching prices and will not like what they see.
Bear in mind the Philly Fed is a diffusion index. Size of the company reporting does not matter, nor do amounts. For example, a small company reporting a small decline in prices counts as much as a large company reporting a big increase in price.
That said, over time these things average out, and the collapse of all the subcomponents certainly looks ominous.
Mike "Mish" Shedlock