New Orders Push Factory Activity Higher

New orders were the strength of yesterday's Philly Fed report and are also the strength of the manufacturing PMI where the July flash is 1 point over expectations, at 52.9 and the best showing in 9 months, since October last year. The rise in orders is also the strongest in 9 months and came despite only marginal strength in export orders. Gains in output and employment are also positives this month for the PMI. But inventory management remains defensive with stocks of both inputs and finished goods both falling. Respondents also reported negatives, citing weakness in the energy sector and uncertainty tied to the presidential election. Input prices are showing welcome pressure, reflecting rising steel prices and salaries, but selling prices remain flat. The rise in orders is a key positive in this report, pointing to the domestic resilience of the nation's consumer-based economy and hinting perhaps at second-half acceleration for a factory sector that has been no better than flat.

Recent History Of This Indicator:
The manufacturing PMI has been inching higher and further progress, perhaps based on the surprise strength of the June industrial production report, is expected for July. Forecasters see the flash coming in at 51.9 vs 51.3 for final June and 51.4 for the June flash. June saw a pickup in new orders and a 2-year high in export growth. Production was also up as was employment. Still, readings in this report have been no more than modest at best.