Unlike Monday's Empire State report which is pointing to out-and-out weakness for the November factory sector, the Philly Fed's November report is no worse than flat and points to little month-to-month change for a sector, however, that continues to struggle. The Philly Fed index ended two months of contraction with a small gain of 1.9 which is near enough to the Econoday consensus for no change. But new orders are not in the plus column, at minus 3.7 for a second straight negative score. Shipments are also in the wrong column, at minus 2.5 for what is also a second straight negative month. The average workweek is down very sharply in the Mid-Atlantic factory sector, at minus 16.2 which doesn't point to strength ahead for employment.
But employment is one of the positives in the November report, at plus 2.6 and up from minus 1.7 in October. Still, this is a small gain. But one indication pointing to employment strength ahead is the first upturn in backlogs since June, at plus 2.4. Also pointing to employment strength is a strong 6.7 point gain for the six-month outlook to 43.4 where the future employment component is very strong, up more than 14 points to 28.2.
There's good new and bad news in this report but compared to the report's own trend, the news is mostly good and underscores Tuesday's strong bounce in the manufacturing component of the industrial production report. Not strong at all, however, have been some other regional Fed reports with Kansas City to give its November update tomorrow.
The Philadelphia Fed manufacturing report sank into contraction in October and September but is expected to come out at neutral in November with the Econoday consensus calling for a zero reading. New orders plunged a very steep 20 points in the October report to end up well in the negative column at minus 10.6. Unfilled orders have been showing similar contraction, a factor that drove employment into the negative column in October. Note that the release time of this report, a mainstay of the U.S. economic calendar, has been moved from 10:00 a.m. ET to 8:30 a.m., making it available before 9:30 opening of the U.S. equity markets.