The Philadelphia Fed released its latest report on regional business activity, revealing a decrease in their gauge to negative 10.5 in December from negative 5.9 the previous month. This indicates deteriorating conditions within the region. Economists who were polled by the Wall Street Journal had expected a negative 4 reading for December. This marks the 17th negative reading out of the past 19 months.
Key Details
- The barometer on new orders experienced a significant drop to negative 25.6 in December, following a slightly positive reading of 1.3 in the previous month.
- The shipments index remained in contraction territory at negative 10.8.
- The measure on six-month business outlook saw an increase to 12.1 from a negative reading of 2.1 in November, reaching its highest level since July.
The Big Picture
The Philadelphia Fed index is among the first regional manufacturing gauges that offer timely insights into the overall state of the manufacturing sector. In December, the Empire State Index, a similar measure of factory activity in New York State, witnessed a decline to negative 14.5 from a positive 9.1 in the prior month. When taken together, these data points suggest a further weakening in manufacturing.
The national ISM factory index has recorded thirteen consecutive months of contraction. The December data for this index will be released early next year. Economists believe that there is potential for an increase in capital spending if long-term bond yields remain low, as they have been for the past month.
Market Reaction
Stocks (DJIA SPX) were expected to open higher on Thursday, while the 10-year Treasury yield (BX:TMUBMUSD10Y) was down to 3.84% in early morning trading.
