Growth Stagnant for Philadelphia Manufacturing in May

Written by Sandy Williams

Manufacturing conditions were essentially unchanged in Philadelphia in May. The Philadelphia Federal Reserve Manufacturing Business Outlook registered -1.8 on the diffusion index, the eighth month of negative readings in the last nine months. The slip was a surprise to analysts who forecast a rise to 3.0 for the index.

The new orders index decreased from 0.0 to -1.9 while the shipment index picked up 10 points. Unfilled orders and delivery times remained negative in May. The inventory index rose to -2.5 from -20.5, for its highest reading in nine months.

Employment also showed weakness in May, recording a fifth negative index reading. The workweek index remained negative as well but improved by one point.

About 20 percent of manufacturers reported receiving higher prices for their goods in May. The index for prices received doubled from 7.4 to 14.8. Input costs also rose, with 24 percent of manufacturers noting an increase. The index for prices paid rose from 13.2 to 15.7.

Slightly more than 47 percent of firms surveyed expected an increase in future business activity indicating the current manufacturing weakness is thought to be temporary. The future activity index remained higher than the beginning of the year but fell from 42.2 in April to 36.1. Other future indexes also decreased during the month.

In the special question section, respondents were asked what they think the annual percent change would be for prices of goods and services sold by the firm and prices paid by employees and consumers for goods and services. The response was an upward change of 2 percent in each case. In the next ten years, Philadelphia manufacturers expect prices for U.S. consumers to rise 2.5 percent.

The summary by the Federal Reserve stated:

“This month’s Manufacturing Business Outlook Survey suggests essentially no growth of the region’s manufacturing sector. The survey’s indicators for general activity, new orders, shipments, and employment all remained negative. Though indicators for future conditions fell from last month, expectations for future growth continue to be positive.”

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