The manufacturing sector in the Philadelphia region grew overall in August, according to a survey of firms conducted by the Federal Reserve Bank of Philadelphia. The survey, which encompasses manufacturers in Pennsylvania, New Jersey, and Delaware, indicates general activity, new orders, and shipments were positive for the first time since May 2022, while the employment indicator was negative. The price indexes remained near their long-term averages. The outlook for the next six months was less optimistic, as most of the future indicators declined.
The survey’s diffusion index for current general activity, which measures the difference between the percentage of firms reporting increases and decreases in activity, rose from -13.5 in July to 12.0 in August, its first positive reading since August 2022. About 25 percent of the firms reported increases in activity, up from 17 percent in July, while 13 percent reported decreases, down from 30 percent. The majority of the firms (58 percent) reported no change in activity.
Greater Demand, but Employment Struggles
The new orders and shipments indexes also turned positive in August, after being negative for 14 consecutive months. The new orders index jumped 32 points to 16.0, and the shipments index increased 18 points to 5.7. However, the employment index fell 5 points to -6.0, indicating a net decline in employment among the firms. The average workweek index improved 9 points to 6.3.
Prices Near Historical Average
Manufacturing companies responding to the survey reported overall increases in prices paid and prices received, but both price indexes were close to their historical averages. The prices paid index rose 11 points to 20.8, with 27 percent of the firms reporting higher input prices and 6 percent reporting lower prices. The prices received index dropped 9 points to 14.1, with 27 percent of the firms reporting higher output prices and 13 percent reporting lower prices.
Special Survey Question: Price Change Forecasting
In special questions, the firms were asked to forecast the changes in their own prices and consumer prices over the next year. The median forecast for their own prices was an increase of 4.0 percent, down from 4.5 percent in May. The median forecast for consumer prices was also an increase of 4.0 percent, down from 5.0 percent in May.
The diffusion index for future general activity dropped 25 points to 3.9, its lowest level since May. About 27 percent of the firms expected an increase in activity over the next six months, slightly more than the 23 percent that expected a decrease. The future new orders and shipments indexes also fell significantly, while the future employment and price indexes rose slightly. The future capital expenditures index turned negative for the first time since April.
