The latest reading of the Philly Fed Manufacturing Index showed steady, high level growth for the month of October. Although the gauge saw a slight decline from a September reading of 22.9 to a current reading of 22.2, all indications are that the economy continues to expand.
The 22.2 reading was above consensus estimates, which had called for a pullback in the gauge to a reading of 20.5. Any reading above the zero line indicates growth while readings below the zero line indicate contraction.
According to marketwatch.com, the Philly Fed Index has averaged 23.1 this year, which is down from last year’s average of 27.4. Nevertheless, the current reading is considered by analysts to be strong and essentially in line with the current pace of overall economic activity.
The report also appears to demonstrate the positive effects of fiscal stimulus on the factory sector and could point to solid GDP readings for Q3.
Will the Fed Continue to Raise Rates?
Solid manufacturing data and a strong Q3 GDP figure could potentially give the Fed more reason to stay on the path of gradual interest rate hikes. Rising U.S. bond yields has recently been a major source of risk aversion among investors and the threat of further rate hikes could keep market volatility on the rise.
Gold Prices Higher Following Release
Gold prices ticked higher following the release of the report, and have remained strong as of this writing. Stock weakness today, largely blamed on rising Italian bond yields, concerns over slowing growth and declining Chinese stock markets may keep the metal well-supported. According to some analysts, a period of price consolidation is to be expected following last week’s strong gains in the gold market.