Philadelphia Fed Manufacturing Index Breaks Negative Streak

Written by Sandy Williams

The Philadelphia Fed Manufacturing Business Outlook Survey for March rose sharply to the first positive reading in seven months. The index gained 15.2 points to register 12.4. The index for new orders jumped 21 points to 15.7, returning to growth status, while shipments climbed 20 points.

Both unfilled orders and deliver times improved in March, increasing 11 points and 16 points, respectively. Manufacturing firms reported inventories continuing to decline.

Employment levels improved by 4 points but remained negative at -1.1 suggesting continued weakness. Average work week hours increased slightly.

The prices received index returned to a positive reading in March, gaining 8 points to register 3.5 although 81 percent of firms surveyed reported no change in prices. The prices paid index remained negative for the seventh consecutive month.

The outlook for future general activity jumped 11.5 points to 28.8 with orders and shipments expected to improve. More than 22 percent of firms expect to hire new workers in the next six months. Manufacturers are also expecting both input and output prices to increase during the period.

Capital spending is expected to increase with 46 percent of firms planning expenditures due to improved sales, higher capacity utilization and capital goods replacement.

Encouraging manufacturing reports this month suggest the sector is gaining strength.

“The improvement supports our view that we are moving past the weakest period for the manufacturing sector. It is likely that we are now past the biggest drags from the stronger dollar and inventory correction,” said Daniel Silver, an economist at JPMorgan in New York.

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