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Philadelphia Fed Outlook Reported Activity recovered sharply in July
Manufacturing conditions in the region showed improvement this month, according to firms responding to the July Manufacturing Business Outlook Survey. The survey’s indexes for general activity, new orders, shipments, and employment remained positive and increased from their June readings. Most of the survey’s future activity indexes increased, suggesting improved optimism about growth for the next six months.
Current Indicators Suggest Growth
The diffusion index for current general activity more than recovered from its decline last month, increasing from 0.3 in June to 21.8 this month (see Chart 1). The indexes for current shipments and new orders also improved this month: The current new orders index increased 11 points, while the shipments index increased 8 points.
The firms reported increases in manufacturing employment and longer workweeks this month. Over 36 percent of the firms reported higher employment, compared with 25 percent last month. Only 6 percent reported decreases in employment this month. The current employment index increased 15 points to 30.0, its highest reading since October 2017 (see Chart 2). The average workweek index also increased 16 points, hitting its highest reading in 14 months.
Most Firms Report Modest Increase in Recent Demand
In this month’s special questions, the firms were asked to characterize the underlying demand for their manufactured products over recent months (see Special Question). While 32 percent of the firms indicated recent decreases in underlying demand, 56 percent indicated that demand had increased. The largest share, 51 percent, characterized the increase in demand as modest.
Price Indexes Suggest Modest Price Pressures
The prices paid and prices received indexes both increased this month but remained well below their readings over the past few years. The current prices received index, reflecting the manufacturers’ own prices, increased 9 points to a reading of 9.5. Price increases for manufacturers’ own goods were reported by 16 percent of the firms this month, up from 10 percent last month. Price increases for purchased inputs were reported by 29 percent of the manufacturers this month, but 13 percent reported price decreases. The prices paid diffusion index increased 3 points to 16.1.
Most Future Indicators Increased
The diffusion index for future general activity increased 17 points to its highest reading since May 2018 (see Chart 1). Nearly 53 percent of the firms expect increases in activity over the next six months, while 15 percent expect declines. The future new orders index increased 14 points, while the future shipments index was unchanged from an elevated reading. The firms remained optimistic overall about hiring over the next six months: Although the future employment index decreased 2 points, 34 percent of the firms expect higher employment over the next six months. The future capital spending index improved 9 points this month to a reading of 36.9, its highest reading in 17 months.
Responses to the July Manufacturing Business Outlook Survey suggest an improvement in regional manufacturing conditions compared with last month. The new orders index, which reflects demand for manufactured goods, showed improvement this month, and more firms added to their payrolls. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.
Posted: July 18, 2019 Thursday 08:30 AM