(By Kevin Donovan) The Federal Reserve Bank of Philadelphia said its index of manufacturing activity fell further into negative territory this month, indicating contraction in the region's factory output. The result was far below analysts' expectations of a flat reading. Stocks are lower and bonds are higher.
It's problematic to extrapolate a trend from the index, but it delivers a valuable look at contemporaneous conditions. Monetary policy makers will take note. If enough of these snapshots of weakness accumulate, pressure for more Fed action is sure to mount.
The Philly Fed said its diffusion index of current activity fell from a reading of -5.8 in May to -16.6. It was the second consecutive negative reading. "Nearly 40% of the firms reported declines in activity this month, exceeding the 22% that reported increases in activity. Indexes for new orders and shipments also showed notable declines, falling 18 and 20 points, respectively. Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries," the Philly Fed said in a release.
The report echoes the New York Fed's Empire State Survey disappointing portrait of business activity in the Northeast.