US DATA: Philly Manufacturing Sees Historic Reversal, But Details Less Negative

The Philadelphia Fed's Manufacturing Business Outlook Survey's general business conditions index showed one of the sharpest month-to-month deteriorations in series history in October, falling 36 points to  a 6-month low -12.8 (expectation had been for a reading of positive 10.0).

• This series has become increasingly volatile in recent months, following September's surprise 23.5 point jump to the highest since January, and stands in contrast to a sharp increase in the neighboring NY Fed's survey in October (19 points to 10.7), making the underlying signal harder to discern. Either way, the index saw its third biggest monthly drop going back to 2000: to put into perspective, the prior two were October 2008 (global financial crisis), and April 2025 (tariff "Liberation Day").
• That said, the report was merely somewhat mixed opposed to deeply contractionary, and should probably reflect a reversion from an unusually strong prior month.
• The actual level of -12.8 was - excluding April - the lowest since October 2023. The 6-month ahead outlook improved to a 5-month high 36.2 (31.5 prior), with new orders rising to 18.2 from 12.4, and number of employees relatively steady at 4.6 vs 5.6 prior (avg workweek dipped slightly). Shipments were the big driver of the downside, plummeting over 20 points to 6.0, while unfilled orders were a little less negative.
• And expectations across the categories were higher (employment merely steady), with a sharp jump in Capex (25.2 from 12.5).
• Inflation remained stubborn though: current prices paid ticked up to 49.2 from 46.8 with received up to 26.8 from 18.8, reversing September's drop. On the more optimistic side, 6-month ahead prices retreated to their lowest since March: paid at 59.8 from 69.8 prior, with received down to 45.7 from 64.8, suggesting less concern over future inflationary pressures.