Philly Fed manufacturing index contracts for second consecutive month

The Philadelphia Federal Reserve manufacturing index rose slightly, to -4.5 in October (previous: -6.0), below our (-1.0) and consensus (-2.0) expectations for a modestly higher print. The details of the survey were, on balance, quite soft and confirm the signal from this morning's release of the Empire State survey that suggests a sharp slowing in Northeast manufacturing.

New orders (-10.6, previous: 9.4) fell to the weakest level in three years, indicating less demand for manufactured goods. Shipments, which held up remarkably well through August and September, plunged to -6.1, from 14.8 last month.

The labor market side of the survey softened as well. The number of employees (-1.7, previous: 10.2) and average workweek (-7.3, previous: 7.0) both fell in October. The ISM-adjusted version of the Philly Fed index (44.7, previous: 51.0), which averages five of the survey components, dropped to the lowest level since September 2012.

"This morning's data point to further headwinds for the manufacturing sector, where we see risks to already-sluggish activity skewed to the downside", says Barclays.