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Released on 9/16/04 For Sep 2004
Philadelphia Fed Survey
Actual 13.4
Consensus 24.0
Consensus Range 20.0 to 31.0


Highlights
The pace of manufacturing growth in the mid-Atlantic region slowed in September to 13.4 from 28.5 in August and 36.1 in July.

Growth in shipments fell back to 22.4 from 32.0 in August and 41.3 in July, suggesting a cresting in activity.

In contrast, new orders rose sharply to 26.4 from 19.2 in August, an important reading pointing to strong business conditions ahead.

Note the Philadelphia Federal Reserve's index is based on the outcome of a single question on month-to-month business activity, whether it was better, the same, or worse. The index, which appears perhaps to be a little weaker this month than the sub-indexes, is not a composite like the ISM manufacturing index or the Chicago business index.

Of note was strength in employment readings, a good sign that factory payrolls may be continuing to grow. The index for the number of employees rose to 21.5 from 17.2 while the average employee workweek rose to 8.3 from 8.0.

Price readings continued to show pressure. Prices paid rose to 56.4 from 53.7 while prices received rose to 36.1 from 34.1. Gains in prices received indicate manufacturers are enjoying pricing power, an important plus for the sector's employment outlook and perhaps a distant threat to wider price stability.

But the falling trend of the Philadelphia Fed's main index is consistent with other evidence indicating declining rates of growth in the manufacturing sector, including company warnings and soft industrial production data.

Note Wednesday's Empire State report, though raising expectations for today's data, nevertheless shows weakness when August and September are taken together.

Even growth in the ISM manufacturing survey, perhaps the data showing the very most strength, has begun to slow with August's overall index below 60 for the first time in nine months.

Thursday's Philadelphia Fed report does not confirm the economy has regained its traction as Alan Greenspan said last week. The report may add its own chill to next week's Fed policy meeting where a new rate hike appears certain despite soft growth data and easing price data