Philly Fed Slightly Positive After Two Months of Contraction, but New Orders and Shipments Negative, Workweek Collapsed

In what likely amounts to a bit of economic noise, the Philadelphia Fed regional manufacturing report posted a rise of 1.9, slightly beating the economic consensus of 0.

Unlike Monday's Empire State report which is pointing to out-and-out weakness for the November factory sector, the Philly Fed's November report is no worse than flat and points to little month-to-month change for a sector, however, that continues to struggle. The Philly Fed index ended two months of contraction with a small gain of 1.9 which is near enough to the Econoday consensus for no change. But new orders are not in the plus column, at minus 3.7 for a second straight negative score. Shipments are also in the wrong column, at minus 2.5 for what is also a second straight negative month. The average workweek is down very sharply in the Mid-Atlantic factory sector, at minus 16.2 which doesn't point to strength ahead for employment.

But employment is one of the positives in the November report, at plus 2.6 and up from minus 1.7 in October. Still, this is a small gain. But one indication pointing to employment strength ahead is the first upturn in backlogs since June, at plus 2.4. Also pointing to employment strength is a strong 6.7 point gain for the six-month outlook to 43.4 where the future employment component is very strong, up more than 14 points to 28.2.

There's good news and bad news in this report but compared to the report's own trend, the news is mostly good and underscores Tuesday's strong bounce in the manufacturing component of the industrial production report. Not strong at all, however, have been some other regional Fed reports with Kansas City to give its November update tomorrow.

Philly Fed General Activity Indexes



The above graph and table below from the Philly Fed November 2015 Manufacturing Business Outlook Survey.

Philly Fed November Stats



The positive number in unfilled orders likely reflects the huge decline in the average workweek.

The positive general activity is not consistent with a hugely declining workweek, contracting shipments, or contracting new orders.

Most likely, the positive general activity number is random noise or a meaningless improvement. The best one can say is "things are getting worse at a decreasing pace, except of course for the workweek collapse."

Mike "Mish" Shedlock