Philadelphia Fed Manufacturing Index at 47.4
Manufacturing activity in the Philadelphia region expanded in August to its highest level since April 2021, according to the Federal Reserve Bank of
Manufacturing activity in the Philadelphia region expanded significantly in August, according to the Federal Reserve Bank of Philadelphia. The index for general business activity climbed from 41.4 to 47.4, marking its highest level since April 2021.
This month, 56.9% of surveyed firms reported increases in activity, while 9.6% reported decreases. The employment index improved dramatically, jumping 17.9 points to 27.9, its highest reading since April 2022. The average workweek also grew, rising 12.5 points to 26.5.
Current Activity Indicators
Not all indicators showed growth. New orders declined, moving down from 37.0 to 30.1. Shipments also decreased, falling from 33.7 to 27.7.
The prices paid and prices received indices both declined in August. The prices paid index moved from 53.9 to 40.9. The prices received index fell from 27.4 to 17.7. As has been the case for many months, the prices received index remained lower than the prices paid index. This indicates that manufacturers have been absorbing a portion of higher costs.
Future Expectations Surge
Expectations for future growth improved sharply in August. After falling 15.8 points in July, the index for future business activity surged 39.2 points to 73.6. This is the highest level since August 1983.
The gain came from a jump in the proportion of firms expecting an increase in activity, which reached 74.5%. At the same time, the number of firms anticipating a decrease in activity fell to 0.9%.
Other forward-looking indices also showed strong gains. The future new orders index rose from 35.1 to 66.0. The future shipments index moved up from 39.3 to 63.5. The capital expenditures index jumped from 30.1 to 48.2, its highest reading in 53 years.
| Indicator | August Index | Change from July |
|---|---|---|
| Future Business Activity | 73.6 | +39.2 points |
| Future New Orders | 66.0 | +30.9 points |
| Future Shipments | 63.5 | +24.2 points |
| Capital Expenditures | 48.2 | +18.1 points |
| Future Employment | 35.4 | +5.9 points |
Expectations for future prices also increased. The future prices paid index moved from 56.7 to 62.9. The future prices received index rose from 41.4 to 59.8. Both indices remained above their long-run averages. The index for future employment improved from 29.5 to 35.4.
Price Sensitivity and Cost Outlook
In a special set of questions, firms reported on customer price sensitivity and anticipated cost changes. Of those responding, 37.5% reported customers were more price sensitive since last quarter. A majority, 58%, noted customer price sensitivity was unchanged. Only 4.2% estimated customers were less price sensitive.
Looking forward, 43.5% of firms anticipated changes to industry costs in the near term. This is down from 48% last quarter. Further, 80% of those expecting cost changes believed competitors would raise prices in response. The remaining 20% anticipated competitors would keep prices the same. None predicted a decline in prices.
The Philadelphia Fed's survey provides a detailed snapshot of regional factory conditions. The strong forward-looking indicators suggest manufacturers are planning for continued expansion despite current pressures on orders and margins.
