The Philadelphia Federal Reserve's reading on manufacturing activity in the region came in at 5.7, far below expectations. Economists had estimated that the index fell to 12.0 from 15.2 in June, according to Bloomberg. The release noted that new orders and shipments remained strong, although they fell month-over-month. Firms reported "steady employment" in July, with the percentage of companies reporting an increase in employees matching the share reporting a decrease – 12%. Earlier this week, Bank of America Merrill Lynch highlighted research showing that this index is the best indicator of economic growth. And in their preview of the data, the bank's economists wrote: "The surprise jump last month was likely a one-off, as the index had been averaging only 6.1 to start the year. That said, the US economy seems to be broadly strengthening, which should provide some lift to the Philly Fed district’s manufacturing sector. The strong dollar remains a headwind, however, and the recent tumble in oil and commodity prices may yield heightened uncertainty. Developments in Greece and China could also provide some downside pressure." In a note to clients after the release, Barclays economists wrote (link added): "This weaker reading is in line with the ISM-adjusted version of the July Empire State index (49.9, previous: 51.9). Together, these readings imply a muted tone for Northeast regional manufacturing activity in July." SEE ALSO: REVEALED: The best indicator of the US economy Join the conversation about this story »
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