Manufacturers in the Philadelphia region "have been far more downbeat relative to the national average," according to economists from Barclays Capital, who said that while the nationwide ISM manufacturing index rebounded into growth last month, the Philadelphia survey deteriorated further. "We expect this trend to persist in July, with activity in this region only improving modestly and the index remaining deep in negative territory."

Each of the 56 economists surveyed are expecting another negative figure in the month, with forecasts ranging from -22.0 to -5.0.

In June, the Philly Fed's general activity index decreased to -17.1 from May's -15.6, led by negative figures in new orders, employment and shipments, while prices surged at levels not seen in nearly 28 years.

The six-month average is -20.0, a worse figure than the average seen during the 2000-2001 recession.

Karen Cordes, economist at Scotiabank, said the 2000-2001 recession was wholly different in nature and that specific comparisons between then and now are misleading.

She said the Philly Fed survey has decent predictive power for the ISM manufacturing index, which will be released on Aug. 1, but regional implications are limited and markets will only pay attention if the results are off from the consensus.

The Philly Fed will be the second regional manufacturing report to be released in June, following the New York Fed's Empire State survey on Tuesday, which continued its slowdown for the third consecutive month. The headline improved slightly to -4.9 from -8.7, as new orders rebounded almost 14 points to +8.3 and shipments bounced up to +13.5. Meanwhile, prices paid set another record high of +77.9 and employment slipped into slowdown at -6.3.

RDQ economists said the Philly survey should benefit from the continued strength of exports, noting that Friday's international trade report posted an annual 22.5% increase in exports. However, they noted the Philly index "appears weak relative to other manufacturing indicators."

Summing up the last month's results, the Philly Fed report said: "All broad indicators of activity were in negative territory and had declined from their readings in the previous month. Cost pressures remain widespread, with a much larger share of firms reporting increases for input prices this month."

This month, the Philly survey will contain supplemental questions to highlight the pass-through of prices. Manufacturers were asked whether they have passed on rising costs to their customers and if they or their own suppliers had instituted surcharges.

By Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it

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