The Philadelphia Fed manufacturing gauge falls to its lowest level in two years

The payment: The Philadelphia Fed announced on Thursday its measure of regional production activity fell sharply to 2.6 in May from 17.6 in the previous month.

This is the lowest level of activity in two years. Economists polled by the Wall Street Journal were expecting a reading of 15. Any reading above zero indicates expansion in manufacturing.

Key data: The headlines index is based on a single standalone question on business conditions, in contrast to the national ISM manufacturing index, which is composed of components. The sub-components looked a little beefier.

The incoming orders barometer rose by 4.3 points to 22.1. The shipment index rose 16.2 points to 35.3, the highest since last October.

The employment index fell 16 points to 25.5 in May.

Companies continued to report price increases for inputs and their own products. Businesses see prices continuing to rise over the next year, with the median forecast for consumer inflation at 6.5%, up from 5% when the question was last asked in February.

The measure of the business outlook for the next six months fell by 5.7 points to 2.5 in May.

Big picture: The Philadelphia Fed Index is one of several regional manufacturing indicators that provide timely readings of the manufacturing sector.

Earlier this week, the similar Empire State survey released by the New York Fed showed that manufacturing activity fell, with the business conditions index falling 36.2 points to -11.6 points in May.

Economists said the moderation in activity was due to slower demand due to higher prices, disrupted supply chains and shortages.

In April, the national ISM manufacturing index fell to 55.4%, the lowest level since July 2020. Data for May will be released on June 1st.

Market reaction: shares DJIA,

opened lower on Thursday on ongoing fears that higher inflation will lead to slower consumer spending. The yield of the 10-year Treasury note TMUBMUSD10Y,
also weakened by the prospect of slower growth. The Philadelphia Fed manufacturing gauge falls to its lowest level in two years

Brian Lowry

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