US DATA: Philly Fed Manufacturing Sentiment Improves, But Inflation Fears Rise

The Philadelphia Fed's Manufacturing Business Outlook Survey saw a strong recovery in sentiment in July, with the General Business Conditions Index rising to 15.9 from -4 in the prior two months. This was the highest reading in 5 months and the first positive number in 4, and above the 5-year average. 

• It greatly exceeded expectations (Bloomberg consensus was for -1.0), thus mirroring the Empire State Manufacturing survey, and suggested that there is broadening relief over the alleviation of some tariff policy uncertainty. However, the inflation components of the survey suggest some concern over price pressures remains warranted.
• Improvements were seen across subcategories, with shipments and new orders at 5-month highs, and employment reversing higher from a sharp drop in June, and the 6-month ahead outlook improved 3.2 points to 21.5, up from single-digits in Mar-Apr to a level consistent with more typical conditions.
• The closely-watched Capex 6-month plans ticked up 2.6 points to 17.1, remaining within the middle of its longer-term range.
• Overall the report's subcategories equate roughly to a 51 level when translating to the ISM manufacturing survey.
• But the prices categories brought significant upside surprises: current prices paid jumped 17.4 points to to 58.8, rebounding to just below May's 25-month high 59.8. Prices received ticked up 5.3 points to 38.8. The diffusion index shoed 61% of firms reported increases in input prices, 2% decreases, and 31% no change.
• And expected prices paid in 6-months hit a fresh 42-month high 75.3 (up 6.4 points), with expected prices received up 6.9 points to 59.4 (just below April's 67.7 peak).
• While the Empire survey's current prices paid had a notable uptick, its other price categories didn't.