Philly Fed Index Plummets To Lowest Level In Nearly 40 Years

Reflecting the impact of the coronavirus pandemic, the Federal Reserve Bank of Philadelphia released a report on Thursday showing a substantial contraction in regional manufacturing activity in the month of April.

The Philly Fed said its diffusion index for current activity plunged to a negative 56.6 in April from a negative 12.7 in March, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to tumble to a negative 30.

With the much bigger than expected decrease, the Philly Fed’s diffusion index for current activity fell to its lowest level since July of 1980.

The steep drop by the headline index came as the new orders and shipments indexes nosedived to all-time lows during the month.

The new orders index plummeted to a negative 70.9 in April from a negative 15.5 in March, while the shipments index sank to a negative 74.1 from a positive 0.2.

The number of employees index also crumbled to a negative 46.7 in April from a positive 4.1 in March, hitting its lowest level since March of 2009.

The report also said the prices paid index tumbled to a negative 9.3 in April from a positive 4.8 in March, while the prices received index slumped to a negative 10.6 from a positive 6.8.

Looking ahead, however, the Philly Fed said the respondents remained optimistic about growth over the next six months.

The diffusion index for future general activity jumped to 43.0 in April from 35.2 in March, indicating firms expect the current letup in manufacturing activity to last less than six months.

“Manufacturing is in the midst of a broad-based and significant retrenchment,” said a note from economists at Oxford Economics. “The silver lining is that manufacturers believe the downturn will be short-lived, but the recovery is likely going to be very gradual given the severity of the recession.”

On Wednesday, the New York Fed released a separate report showing New York manufacturing activity contracted at the fastest rate on record in the month of April.

The New York Fed said its general business conditions index plummeted to a negative 78.2 in April from a negative 21.5 in March. The index was expected to slump to a negative 35.0.

With the much bigger than expected nosedive, the general business conditions index plunged to its lowest level in the history of the survey—by a wide margin.

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