US Philly Fed index falls further into contraction levels

In June, the Philadelphia Fed manufacturing index extended its slide lower, while the consensus was looking for an improvement. The headline index dropped from -5.8 to -16.6, while an increase to 0 was forecast. The Philly Fed index is now again at its weakest point since August last year. Weakness is confirmed by the details as all but one sub index is in contraction territory. New orders (-18.8 from -1.2), shipments (-16.6 from 3.5),inventories (-8.7 from 4.5), unfilled orders (-16.3 from -9.4) and average workweek (-19.1 from -5.4) worsened sharply and also delivery time weakened further (-15.5 from -14.0). Only number of employees picked up slightly, rising from -1.3 to 1.8. Both the headline figure and the details are really disappointing, suggesting that manufacturing activity is cooling sharply.

Nevertheless, the regional business confidence indicators are usually volatile and therefore we look for further evidence from the national ISM before drawing strong conclusions.

In the week ending the 16th of June, US initial jobless claims fell by 2 000, from an upwardly revised 389 000 to 387 000. The consensus was looking for a drop to 383 000. The less volatile four-week moving average picked up, from 382 750 to 386 250, reaching the highest level since December last year. There were no special factors which could have distorted the data. US jobless claims edged up again over the previous weeks after reaching cyclical lows in February and March. After already several poor payrolls reports, also the claims suggest that the improvement in US labour market conditions has come to a standstill. Continuing claims, which are reported with an extra week lag, stabilized. In the week ending the 9th of June, continuing claims stabilized at an upwardly revised 3 299 000, while an outcome of 3 278 000 was forecast.