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Thursday, March 19, 2020

Philly Fed "Current Manufacturing Indicators Show a Weakening in Activity in March"

by Calculated Risk on 3/19/2020 08:45:00 AM

From the Philly Fed: Current Manufacturing Indicators Show a Weakening in Activity in March

Manufacturing firms reported a significant weakening in regional manufacturing activity this month, according to results from the Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments fell precipitously this month, coinciding with developments related to the coronavirus. The firms reported a slight overall increase in employment, however, and a near-steady workweek. The broadest indicator of future activity weakened somewhat but remained elevated; however, firms still expect overall growth in new orders, shipments, and employment over the next six months.

The diffusion index for current activity declined markedly from a three-year high reading of 36.7 in February to -12.7 this month, its lowest reading since July 2012 … The firms reported an overall slight increase in manufacturing employment this month, but the current employment index decreased 6 points to 4.1, its lowest reading since November 2016. The average workweek index fell 10 points but remained slightly positive at 0.5.
emphasis added
This was well below the consensus forecast. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through March), and five Fed surveys are averaged (blue, through February) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through February (right axis).

These early reports suggest the ISM manufacturing index will decline significantly in March.