Philly Fed Misses Again As New Orders, Jobs, Workweek, & Inventories Crash

The Philly Fed general business activity index somehow managed to rise very modestly in October from -6.0 to -4.5 (but missed expectations) even as 7 out of 9 constituent components dropped if not crashed outright!.

This the second monthly decline in a row - not seen since 2013. We say "somehow" as the underlying components were a total disaster. New Orders collapsed from +9.4 to -10.6, Unfilled orders crashed to -11.7, Employment plunged from 10.2 to -1.7, and workweek evaporated from +7.0 to -7.3. Even "hope" collapsed with future expectations dropping from 44.0 to 36.7 with CapEx expectations cliff diving.

Headline remains weak


But the underlying components are a disaster!


  • New Orders from 9.4 to -10.6
  • Shipments from 14.8 to -6.1
  • Unfilled Orders -6.6 to -11.7
  • Delivery Times 0.5 to -1.2
  • Inventories -2.7 to -17.4
  • Number of Employees 10.2 to -1.7
  • Average Workweek  7.0 to -7.3


As Philly Fed notes,

The indexes for current new orders and shipments showed notable deterioration this month, with both indexes falling below zero, marking the first negative reading for the new orders index since May 2013. Indicators for delivery times and unfilled orders were also negative. Thirty percent of the firms reported a decline in inventories this month, and the current inventories index declined 15 points.


The survey’s indicators for labor market conditions suggest slightly weaker employment. The percentage of firms reporting declines in employment (15 percent) was slightly greater than the percentage reporting increases (13 percent). The employment index declined nearly 12 points, from 10.2 to -1.7. Firms also reported overall declines in average work hours in October, and the workweek index was negative for the first time since May.

Optimism tumbles

The diffusion index for future general activity fell from a reading of 44.0 in September to 36.7 this month. The percentage of firms expecting increases over the next six months (53 percent) remains significantly greater than the percentage expecting decreases (16 percent). The index, while generally positive, remains below its reading from one year ago (see Chart 1). Future indexes for new orders and shipments showed a modest decrease this month, but the majority of firms expect increases over the next six months. Firms also marked down their forecast for employment increases. The future employment diffusion index fell 4 points. The percentage of firms expecting employment increases (25 percent) still exceeds the percentage expecting decreases (11 percent). 

 For the second consecutive month, regional manufacturers reported declines in overall activity. Indexes for new orders, shipments, employment, and average work hours all dipped into negative territory this month. On balance, firms reported near-steady prices. Despite the reported deterioration in current conditions, most firms continued to expect growth over the next six months, although the levels of optimism as suggested by the survey’s future indexes weakened across all broad indicators this month.