Philly Fed Business Conditions Report Slips

The headline for the Philly Fed report is not a composite but an answer to a single question on recent business conditions. Sometimes the results for this question don't match the signals from more specific questions on orders or employment which is the case in the December report.

The general business conditions index for December slipped 3.5 points to 9.4 which is well below Econoday's consensus range. Yet new orders rose a solid 5.4 points to 14.5 with unfilled orders popping solidly out of two months of contraction to 9.7. Shipments did slow from 21.6 to 10.0 but, given that the reading is well above zero, still point to sizable monthly growth.

Employment is very strong in today's report, at 18.3 for a 2-point gain with the 6-month outlook up 4.5 points to a very favorable 31.7. Price data show extended and elevated pressure for inputs and, in what is a big plus for this sample, increasing and substantial traction in selling prices.

Monday's Empire State report did show cracks in its December report but less so for today's Philly data which, given the strength in orders and selling prices, point to opening-year strength for this report this time next month. Watch tomorrow for definitive factory data out of November with the durable goods report where bounce-back strength is the call.