Philly Fed Index Falls More Than Expected But Remains Positive

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While the Federal Reserve Bank of Philadelphia released a report Thursday showing that the mid-Atlantic region's manufacturing sector has continued to show signs of recovery in October, the index of activity in the sector fell by more than anticipated.

The report showed that the Philly Fed's index of current activity fell to 11.5 in October from 14.1 in September, although a positive reading still indicates growth in the sector. Economists had been expecting the index to fall to a reading of 12.0.

A slowdown in the pace of shipment growth contributed to the bigger than expected decrease by the index, with the shipments index falling to 3.3 in October from 8.2 in September.

At the same time, the report showed a notable improvement in new orders, as the new orders index rose to 6.2 from 3.3 in the previous month.

Additionally, while labor market conditions remain weak, the number of employees index rose to a negative 6.8 in October from a negative 14.3 in September. With the increase, the index rose to its highest reading since September 2008.

The Philly Fed also said that the prices paid index increased to 21.3 in October from 14.9 in September, while the prices received index rose to a negative 4.3 from a negative 10.6 in the previous month.

Looking ahead, the future general activity index fell to 39.8 in October from 47.8 in September. While the index fell to its lowest reading since April, it remained positive for the 10th consecutive month.

Earlier in the day, the New York Federal Reserve released a separate report showing that conditions for New York manufacturers improved significantly in October, with the index of activity in the sector rising to its highest level in five years.

The New York Fed said its general business conditions index rose to 34.6 in October from 18.9 in September, with a positive reading indicating growth in the manufacturing sector. Economists had been expecting the index to fall to a reading of 17.5.

With the unexpected increase, the business conditions index rose to its highest level since May of 2004, when the index came in at 35.0.

However, Peter Boockvar, equity strategist for Miller Tabak, noted, "The number only measures the direction of improvement, not the degree. So, don't extrapolate that we are partying like its May 2004, but there is no question today's figure was impressive."

While the Federal Reserve Bank of Philadelphia released a report Thursday showing that the mid-Atlantic region's manufacturing sector has continued to show signs of recovery in October, the index of activity in the sector fell by more than anticipated. The report showed that the Philly Fed's index of current activity fell to 11.5 in October from 14.1 in September, although a positive reading still indicates growth in the sector. Economists had been expecting the index to fall to 12.0. (Market News Provided by RTTNews)