US DATA
The Philadelphia Fed Business Outlook survey took an unexpected turn for the worse in December, with the index for current general activity dropping to -16.4 from -5.5 prior, versus the rise to +2.8 expected.
- That was the worst outturn since April 2023, and weakness was widespread throughout the survey: New Orders (-4.3, lowest since May) and Shipments (-1.9) both declined and turned negative, while Employment dipped 2 points to 6.6 and the average workweek index fell back into negative territory (-8.2) after a November jump.
- Optimism has faded too: the future general activity index dropped 26 points to 30.7 after two consecutive rises, with future new orders, future shipments, future employment, future capex, and future prices paid dropped - future prices received rose though. Note that optimism was a 42-month high in November, seemingly related to the election results, but that impact has more than fully reversed.
- And on inflation, prices paid rose 5 points to 31.2, though prices received dropped for a 3rd consecutive month to 7.3. A gap appears to be opening up between the two measures - this is the widest spread (-23.9) since April 2022, potentially suggestive of margin pressures building.
- Overall we would discount the month-to-month readings, but it's clear that the post-election optimism among regional manufacturers has faded, and the survey continues to point to sluggish manufacturing activity.
- Indeed, using appropriate weightings, this survey is equivalent to a roughly 49 ISM Manufacturing reading.
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