The July Philly Fed manufacturing survey confirmed the moderation seen in the NY manufacturing figure with a 5.1 reading vs expectations of 10, down from 8 in June and the lowest since Aug ’09. New Orders went negative at -4.3, down from +9 and Shipments, which followed previous orders, fell to 4 from 14.2. Backlogs fell 9 pts to -9.6. The Employment index was a lone positive as it rose back above zero to 4.0 from -1.5. Inventories were little changed. Prices Paid rose 3 pts but Prices Received fell by 2 pts. Of particular disappointment, the 6 month Business Activity outlook fell to 25 from 40.2 to the lowest since March ’09. Bottom line, activity in the Philly region has expanded for 11 straight months but over the past two has shown some clear deceleration. Manufacturing has been the bright spot in this recovery but now it needs more clarity on end demand growth which is just not there. The 2 yr note yield is at a fresh record low in response.
