The Philadelphia Federal Reserve Business Outlook Survey's general conditions index drifted higher in May to -22.6, from -24.4 in April, the best reading since September. Deterioration in the Third District manufacturing sector is slowing, hinting at another possible upturn in the ISM Manufacturing Index to be released June 1st.

Many Indices Rose, but Still Below 0

• The shipments index jumped 16.7 points to -19.0, and the employment indices also improved sharply. While it is positive that such upturns are happening, the numbers still signal contraction in activity, although at a moderating pace.

• Surprisingly, the index for new orders drifted lower to -25.9, showing flat demand in manufacturing. Interestingly, the prices indices rebounded from their lows in April.

A Better Future Ahead

• The general activity index for six months ahead improved sharply to 47.5, continuing last month's sizable gain. The future capital expenditure index also increased to -0.2 on manufacturers' improved perception of the future.

• Echoing the May Empire Manufacturing Index, the rate of decline in manufacturing activity appears to be slowing, signaling another possible increase in the May ISM number.