US DATA: Weak Philly Fed Mfg Activity With Higher Prices, But Outlook Brightens

The Philadelphia Fed's Business Outlook survey showed a bigger-than-expected relapse in regional manufacturing activity in August, along with a continued surge in prices paid - making for a largely stagflationary report, albeit with some improvement in forward-looking indicators.

• The a -0.3 reading for current general business conditions (6.5 expected, 15.9 prior) brought it back negative where it had been for 4 consecutive months amid tariff-related concerns, before jumping to a 5-month high in July.
• The internals for current activity were poor. New orders were negative for the first time in 4 months, falling to -1.9 from +18.4 (suggesting a decline in orders). Shipments fell to a 3-month low 4.5 from 23.7, while employment also slipped, to 5.9 from 10.3 - these suggest growth but much weaker than prior.
• One saving grace on the activity front was that the outlook improved, with 6-month ahead sentiment up to 25.0 from 21.5, for the highest reading in 3 months. future new orders and future shipments rose to the highest in 3 months, with future capex more than doubling to 38.4, highest since January (the latter has historically been seen as a leading indicator of national non-residential investment).
• However, there were very pronounced price pressures in the survey: current prices paid rose to 66.8 from 58.5, with prices received not keeping pace, up to a 39-month high 36.1 from 34.8. Again, the outlook was the silver lining, with 6-month-ahead prices paid dipping to 68.4 from 75.3, and received to 48.5 to 59.4.
• Philly Fed's survey echoed that of the neighboring district covered by the NY Fed in the price pressure department, but its decline in activity stood out versus Empire's.
• That leaves it a little early to tell what the readthrough of the regional surveys is for the national manufacturing picture, though this should become clearer with August PMI, Dallas Fed, and Richmond Fed data through early next week.