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Philadelphia Fed May Outlook continued to show weakness
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The region's manufacturing sector continued to show weakness in May, according to firms polled for this month's Business Outlook Survey. Although the indexes for general activity, shipments, and employment improved, the index for new orders declined slightly. Firms reported decreases in input prices and prices for their own manufactured goods; however, the corresponding price indexes rebounded slightly from their record lows last month. Most of the survey's broad indicators of future activity improved notably again this month, suggesting that the region's manufacturing executives are more optimistic that a recovery will occur over the next six months.
Most Current Indicators Less Negative This Month
The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -24.4 in April to -22.6 this month. Although an indication of continued overall decline, this reading is the index's highest since last September; it has now edged higher for three consecutive months. Still, the index has been negative for 17 of the past 18 months, a span that corresponds to the current recession (see Chart). The new orders index remained negative this month and was the only broad indicator that did not show improvement (it declined two points). The survey's shipments index, however, rose 17 points, increasing from its record low reading of -35.7 in April to -19.0. The survey's current inventory index improved for the second consecutive month, increasing 12 points (the index is now 27 points above its record low reading in March). The survey's delivery times and unfilled orders indexes were little changed from last month, suggesting continued weakness.
Responses this month suggest that employment losses have moderated from April. The current employment index, although still negative, increased 18 points. Still, 35 percent of firms reported declines in employment this month; only 8 percent reported increases. The average workweek index also improved this month, increasing 18 points, to -23.2.
Posted: May 21, 2009 Thursday 10:00 AM