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Philadelphia Fed July Outlook Still Suggest Weakness
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The region's manufacturing sector is still experiencing weakness, according to firms polled for this month's Business Outlook Survey. Indexes for general activity, new orders, and shipments all registered negative readings this month, although the indexes' levels remained above their average readings for the year. Firms also report continued declines in employment and work hours this month. Most of the survey's broad indicators of future activity declined slightly this month, but they continue to suggest that the region's manufacturing executives expect a recovery in business over the next six months.
Current Indicators Still Suggest Weakness
The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from -2.2 in June to -7.5 this month. The index has been negative for 19 of the past 20 months, a span that corresponds to the current recession (see Chart). Firms reporting decreases in activity (31 percent) slightly outnumbered those reporting increases (23 percent). Other broad indicators suggest weakness, although recent declines in new orders may be stabilizing. The current new orders index edged three points higher, to -2.2, its highest reading in 10 months. However, the current shipments index declined 12 points. Indexes for delivery times and unfilled orders, which have remained negative for 15 consecutive months, suggest continued weakness.
Labor market conditions remain weak, and firms continue to report employment losses and declines in work hours. The current employment index declined to -25.3, from an already weak reading of -21.8. Thirty percent of firms reported declines in employment this month; only 5 percent reported increases. Although the workweek index improved 11 points, 24 percent of the firms reported shorter hours and 9 percent reported longer hours.
Posted: July 16, 2009 Thursday 10:00 AM