May Philly Fed Report One Of The Strongest On Record

A 45-year high for new orders tops a May Philly Fed report that is one of the strongest on record. The main index far surpassed Econoday's top estimate coming in at 34.4 for the strongest showing since May last year and one of the strongest of the 9-year expansion. New orders surged more than 22 points to 40.6 for the strongest showing since March 1973.

Signs of overheating are easy to find especially selling prices which jumped nearly 7 points to a very hot 36.4 and the highest reading since May 1981. Input prices slipped back slightly but remain extremely elevated at 52.6. Another sign of stress comes from delivery times which, at 18.5, are among the very highest in the report's 50 years of data. And the sample is hiring, at 30.2 which is up more than 3 points and the second highest on record.

If there were any concerns over tariffs these seem to be limited with the 6-month outlook at 38.7 which is down only 2 points in the month though it is down more than 9 points from March when steel and aluminum tariffs were first imposed.

The results from small sample surveys, such as the Philly Fed where a month's responses may total no more than 100, have to be taken cautiously. But there is little question that overheating is a risk for Philly's sample and by extension, perhaps, for the whole of the factory sector where order growth is nearing a 10 percent clip.