US DATA: Philly Service Firms Far More Optimistic About Themselves Than Region

Service firms in the Philadelphia Fed district were far more optimistic about their own outlook than the dismal prospects for their own region in May, with the largest discrepancy on this basis since the series started in 2011. The net share who saw an increase in full-time employees in May was also the highest since Jan 2024. 

• The Philly Fed non-manufacturing only inched up to -41.9 in May after the -42.7 in April has only seen lower in Apr/May 2020 for a series starting in 2011.
• Survey responses were collected from May 5-15, offering some time to start processing the de-escalation in US-China trade policies on May 12.
• It’s a somewhat similar story to the mild improvement seen in last week’s NY Fed services index which ticked up from -19.8 to -16.2 in May, only that -19.8 isn’t as outwardly weak on a historical basis.
• Back to the Philly survey, there was interestingly a greater improvement at a firm- rather than regional-level, with the firm-specific index increasing from -26.7 to -16.3.
• This discrepancy between the firm-level and broader assessment of activity, which could point to some upside ahead, is more pronounced in the six-month forward-looking index.
• Specifically, the 6-mth regional index only increased from -31.8 to -30.6, which aside from the -31.8 is the lowest since Apr 2020. However, the 6-mth firm index jumped to +11.6 after two negative months with -23.0 in Apr and -19.8 in Mar. The latter compares with the 31.5 averaged in 2024, including 44.7 in the month of the presidential election, plus 20.8 averaged in 2023.
• There were some mixed, but ultimately encouraging, signs for employment as well. The full-time employees index jumped from -7.2 to +11.3 for its highest since Jan 2024 whilst the part-time employees index fell from -7.9 to -11.9 for its lowest since Jul 2020.