Philadelphia Fed's manufacturing index drops to 6-month low in July

The Federal Reserve of Philadelphia’s manufacturing index dropped to six-month low during the month of July, indicating the hard-hit sector manages to sail through an environment of global headwinds and financial instability.

The Philadelphia Federal Reserve’s index of business conditions declined to negative 2.9 this month from positive 4.7 in June. This is the ninth month of declining activity in the past 11 months and the slowest pace in six months. This contrasted with the market expectations of a slip to 3.5 in July, though remain positive. Any number below zero means more companies are expanding instead of contracting.

In contrast, the index for new orders rose to 11.8 this month from negative 3 in the prior month. The shipments index increased to 6.3 in July from negative 2.1. And more manufacturers in the Philadelphia region expect business to be better six months from now with the index for future general activity rising 4 points to 33.7.

"Stability in national manufacturing in the second half of this year will be an important condition for other sectors in the US economy, namely services, to rebound from a relatively softer first half," said  Jesse Hurwitz, Economist, Barclays.

Meanwhile, the ISM manufacturing index rose 53.2 percent in June from 51.3 percent in May, recording the fastest pace in fifteen months.