Amid the concerns about deterioration in the factory sector related to slower global growth and uncertain trade policy, the early August data out of the New York and Philadelphia Feds suggested that modest expansion remains in place.
The general business conditions index for New York nudged up to 4.8 in August from 4.3 in July, while the Philadelphia index dipped to 16.8 after 21.8. Both indexes have seen volatility in 2019 to-date, but it appears that conditions are steadying and show activity is continuing to grow, albeit well below the pace seen last year.
Perceptions for future business conditions were down for both Districts. New York saw a decline to 25.7 in August from 30.8 in July, and Philadelphia was down to 32.6 from 38.0. The outlook for six months from now is also softer than it was for most of 2018, but the readings are by no means recessionary in expectations.
Neither index is computed from components. However, renewed new orders is probably the main reason for the improved activity readings. For New York, new orders returned to a positive 6.7 in August after two months of negatives. For Philadelphia, new orders reached 25.8 in August after 18.0 in July and was the highest since 38.5 in May 2018. Some of this may be efforts to get ahead of the now-defunct deadline of September 1 for fresh tariffs on goods from China.
The indexes for prices paid reflected the decline in energy costs. The New York index dipped to 23.2 in August from 25.5 and the Philadelphia index was down to 12.8 after 16.1.
The New York-ISM equivalent index was up 3.1 points to 52.0 in August and the Philadelphia-ISM equivalent was down 3.1 points to 56.6. The opposite moves actually lead to a similar conclusion, that overall activity is trending at a modest level that is managing to remain above the 50-mark to might coincide with the onset of a recession, albeit narrowly.
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