Philly Fed Index Unexpectedly Returns To Negative Territory In April

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After reporting an unexpected expansion in regional manufacturing activity in the previous month, the Philadelphia Federal Reserve released a report on Thursday showing that activity unexpectedly pulled back into contraction in the month of April.

The Philly Fed said its diffusion index for current activity fell to a negative 1.6 in April from a positive 12.4 in March. A negative reading indicates a contraction in regional manufacturing activity.

Economists had expected the index to show a more modest decrease to a positive 9.0, which would have still indicated growth.

Other indicators suggested a similar relapse, with the shipments index plunging to a negative 10.8 in April from a positive 22.1 in March.

The new orders index also slumped to zero in April from 15.7 in March, as the percentage of firms reporting an increase in new orders was exactly offset by the percentage reporting a decrease.

The Philly Fed said the survey's indicators of employment corroborated the weakness, with the number of employees index tumbling to a negative 18.5 in April from a negative 1.1 in March.

On the other hand, the bank said the survey's future indicators bucked the trend of weakening current indicators this month.

The diffusion index for future general activity jumped to 42.2 in April from 28.8 in March, reaching its highest level in fifteen months.

The report also showed increases in the readings on inflation, as the prices paid index jumped to a positive 13.2 in April from a negative 0.9 in March and the prices received index rose to 7.4 from 3.5.

Last Friday, the New York Fed released a separate report showing that business activity for New York manufacturers expanded faster than expected in April

The New York Fed said its general business conditions jumped to 9.6 in April from 0.6 in March, while economists had expected the index to rise to 3.0.

With the much bigger than expected increase, the index rose to its highest level since reaching 9.7 in January of 2015.

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