Highlights
The Philadelphia Fed's manufacturing survey shows alarming weakness in April, results that seriously raise the prospect that the sector on a national basis is contracting. The headline business activity index fell to -24.9 vs. March's already dismal -17.4. New orders of course are the life blood of any business and manufacturers in the Mid-Atlantic region are reporting wide month-to-month contraction at -18.8 vs. -9.3 in March.

Prior weakness in new orders pushed shipments down, at -8.0 vs.-6.3 in March and -12.2 in February. Four straight months of contracting shipments indicate that the region's manufacturing sector is in fact in recession. Unfilled orders are contracting severely, at -16.8, and together with the negative readings for new orders point to future recession as well. Inventories are at least not piling up, at -26.2 as manufacturers appear to be filling production needs from existing supplies. The real bad news for everyone is employment which fell for a second month at -11.1. The workweek of course is contracting at -12.3.

Prices, like most everywhere else, are rising in the region with input prices at a severely elevated 51.6, along with indications that higher prices are being passed through to customers as output prices jumped nearly 10 points to 30.9.

This report is as bad as it gets, but there was little immediate reaction in the financial markets. The results contrast with stable readings in Monday's Empire State report but that report carries much less weight than this report. This report raises serious questions whether the ISM national report on the manufacturing sector will begin to show serious contraction.

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