In quite a stark contrast to the Empire State Manufacturing Survey, the economy in the Philadelphia region appears to be picking itself up and dusting itself off already. While the New York district sees trouble ahead in manufacturing for the month of November, the Philadelphia Fed Survey shows that the month of November is no worse than flat, with positive changes in a few important subcomponents.
Overall, the general business conditions reading ended its two-month streak of contraction with a slight gain of 1.9, which is roughly in-line with the consensus expectation for no change. However, new orders remain in the red at a reading of -3.7, which is still quite the improvement over the -10.6 reading in the prior month. Pricing levels have contracted slightly with prices paid coming in at -4.9 from -0.1 in the prior month, and prices received at -0.4 down from 1.3 in October. The chart below shows the relationship between the aforementioned readings over the course of the past 52-weeks.
Across the other subcomponents, it's difficult to understand just how the headline reading was able to break back into positive territory. Shipments are definitely going in the wrong direction, coming in at -2.5 for the second month in a row of negative data. However the most difficult data to comprehend comes in the form of employment.
Firstly, the average workweek has taken a sharp turn to the downside for workers in the Mid-Atlantic region, coming in at -16.2 down from -7.3 in the prior month, and this definitely does not point to strength for employment in the near future. Nevertheless, employment over is actually one of the positive points in this November report. The employment reading came in at 2.6 for the month, up from -1.7 in October, and although this technically is a positive reading the gain is relatively meaningless.
There is some hope for employment in Mid-Atlantic manufacturing going forward, primarily in the form of backlogs, which came in at a reading of 2.4 and in so doing posted the first positive reading since June 2015. Additionally, the six-month outlook overall points to employment strength as the November reading showed a 6.7-point gain to 43.4, where the future employment reading is also quite strong, posting a 14-point gain to 28.2.
Although there is good and bad news strewn throughout the Philly Fed report, when compared to this report's historical trends the news for November is mostly positive. This is hopefully the first of many manufacturing reports that helps to underscore the strong data noted in the U.S. Industrial Production Report, and ought to mean a strong, year-end boost for shares of the Industrial Select Sector SPDR Fund (NYSEARCA:XLI).
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