Thursday, April 16, 2020

Philly Fed "Manufacturing firms reported continued weakening" in April

by Calculated Risk on 4/16/2020 09:07:00 AM

From the Philly Fed: Manufacturing firms reported continued weakening

Manufacturing firms reported continued 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 once again fell sharply this month to long-term low readings, coinciding with ongoing developments related to the coronavirus pandemic. The indexes for employment and the average workweek, which had both remained positive last month, fell into negative territory this month. The firms expect the current letup in manufacturing activity to last less than six months, as the broadest indicator of future activity strengthened further from last month’s reading; furthermore, the firms continue to expect overall growth in new orders, shipments, and employment over the next six months.

The diffusion index for current activity declined strikingly for the second consecutive month from -12.7 in March to -56.6 this month, falling below its nadir during the Great Recession. This is the current activity index’s lowest reading since July 1980. … The firms reported widespread decreases in manufacturing employment this month, as the current employment index fell 51 points to -46.7, its lowest reading since March 2009. The average workweek index fell 55 points to -54.5, its lowest reading ever.
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 April), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

These early reports suggest the ISM manufacturing index will decline significantly in April, likely to new lows.