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The Empire State and Philly Fed manufacturing surveys both showed an acceleration in activity in May, shaking off possible concerns about US trade policy as the economy moves past the temporary deceleration in Q1 growth, explains the research team at Nomura.

Key Quotes

“The results from both surveys, the first for the manufacturing sector in May, indicate that while trade concerns may still be weighing on forward-looking indicators, positive near-term momentum in factory activity remains firm.”

“The Philly Fed general business conditions index jumped 11.2pp to 34.4 in May, well-above the six-month average of 26 and above expectations (Nomura: 20, Consensus: 21). Meanwhile, the Philly Fed new orders index increased 22.2pp to 40.6, the highest reading since the 1970s. The Empire State survey general business conditions index increased 4.3pp to 20.1 as the shipments (+1.6pp) and new orders (+7pp) indices both improved, consistent with steady contemporaneous activity and near-term momentum. The number of employees indices in both surveys remained elevated, indicating that manufacturing employment will likely continue to help boost overall payroll employment growth.”

“There were few downsides to both surveys in May. However, the forward-looking indicators in both regional manufacturing surveys, while elevated, suggest that expectations have tempered further from recent highs.”