Activity in the Philadelphia-area manufacturing sector unexpectedly contracted in the month of May, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of activity in the sector turning negative for the first time in eight months.
The Philly Fed said its diffusion index of current activity tumbled to a negative 5.8 in May from a positive 8.5 in April, with a negative reading indicating a contraction in regional manufacturing activity. The drop surprised economists, who had expected the index to climb to a reading of 10.0.
A contraction in new orders contributed to the weakness in the sector, with the new orders index falling to a negative 1.2 in May from a positive 2.7 in April. The new orders index was also in negative territory for the first time in eight months.
The number of employees index also showed a steep drop, plummeting to a negative 1.3 in May from a positive 17.9 in April. The negative reading indicates a drop in employment.
While the unfilled orders index also turned negative, the shipments index edged up to 3.5 in May from 2.8 in the previous month.
The report also showed that the prices paid index plunged to 5.0 in May from 22.5 in April, while the prices received index fell to a negative 4.5 from a positive 9.4.
Looking ahead, the future general activity index tumbled to 15.0 in May from 33.8 in April. The Philly Fed noted that the outlook among the reporting firms was notably less optimistic.
The data from the Philly Fed is in stark contrast to Tuesday's report from the New York Fed showing an acceleration in the pace growth in New York manufacturing activity.
The New York Fed said its general business conditions index jumped to 17.1 in May from 6.6 in April, with a positive reading indicating an increase in regional manufacturing activity. Economists had expected the index to show a more modest increase to a reading of 10.0.
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