The Philly Fed Business Outlook survey surged to 16.6, beating expectations by the most since September and rising to 7-month highs. Most subindices rose with shipments surging and new orders rising but prices paid flat. The big worry though is that this six-month forward expectations collapsed to their lowest since April 2013. So the pent-up-weather-demand is being seen as entirely unsustainable by the survey respondents...
From the report:
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of 9.0 in March to 16.6 this month, its highest reading since last September (see Chart). The index has now increased for two consecutive months, following the weather?influenced negative reading in February. The new orders and current shipments indexes also moved higher this month, increasing 9 points and 17 points, respectively.
Indicators suggest slightly improved labor market conditions this month. The employment index remained positive for the 10th consecutive month and increased 5 points, suggesting overall improvement. The percentage of firms reporting increases in employment (20 percent) edged out the percentage reporting decreases (13 percent). The workweek index was also positive for the second consecutive month, edging 2 points higher.
Price Pressures Are Relatively Moderate
The survey’s price diffusion indexes continue to suggest overall moderate rates of increase. The prices received index was unchanged at 4.3. Nearly 76 percent of the firms reported no change in their final goods prices, and the percentage of firms reporting increases (13 percent) was only slightly greater than the percentage reporting decreases (9 percent). The prices paid index edged slightly lower, to 11.3, its third consecutive month of decline. Seventeen percent of the firms reported higher input prices, down from 19 percent in March.
More notably, here is the comment on the only negative in today's report: the forward expectations which "inexplicably" tumbled:
Firms remain optimistic about the growth of overall manufacturing activity for the next six months. The future general activity index remained positive; however, the index decreased nearly 9 points from its reading in March (see Chart). Indexes for future new orders and shipments also edged lower. The future new orders index decreased 3 points, while the future shipments index decreased 8 points. Firms’ responses about future employment continued to reflect overall confidence about future conditions. The percentage of firms expecting employment growth (27 percent) was greater than the percentage expecting employment declines (11 percent). The index, however, decreased 13 points, exactly reversing a 13?point increase in March
Finally, in a special question, respondent firms were asked why they remain in the Philly region. Here is what they listed as their primary reasons: