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The numbers: The Philadelphia Federal Reserve’s manufacturing index fell 7 points to a seasonally adjusted reading of 17.2 in August, the regional bank said Thursday. This is the second straight decline in the index after it his 27.5 in June.
Any reading above zero indicates improving conditions. Economists polled by MarketWatch expected a 20 reading.
What happened: The headline index is based on a single stand-alone question about business conditions unlike the manufacturing index, which is a composite based on components Below the headline, the new orders index fell 4 points to 19. The shipments index fell 5.9 points to 9.4. The survey found that optimism about the next six months remained solid, with the index for future activity rising 3 points to 38.8.
Big picture: Manufacturing has recovered a lot of ground lost from the coronavirus related lockdowns in mid-March but the slowing in the pace of activity in August fits with concern that further gains for the sector will be difficult. Earlier this week, a similar survey conducted by the New York Fed showed activity slowed with sentiment falling 13.5 points to 3.7 in August.
What are they saying? “We think the broader story of the factory sector is that inventories are way too low relative to demand — thus we’d expect strong gains in production in coming months as inventories are rebuilt,” said Neil Dutta, head of economics, at Renaissance Macro Research.
Market reaction: Stocks opened lower but gradually moved into slight positive territory. The Dow Jones Industrial Average DJIA, +0.27% was up 20 points in early afternoon trading.
