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Economy in Brief

Philadelphia Fed Manufacturing Index Surges in March
by Tom Moeller  March 18, 2021

• Headline index jumps to nearly 50-year high.

• Underlying strength is widespread.

• Prices paid strengthen.

The Federal Reserve Bank of Philadelphia's Factory Sector Business Conditions Index jumped to 51.8 during March following February's decline to 23.1 in February. It was the highest reading since April 1973. The Action Economics Forecast Survey expected a reading of 23.0. The percentage of firms reporting improving conditions jumped to 58.9% from 34.6% in February, while the share reporting weaker conditions fell to a lessened 7.1%.

Haver Analytics calculates an ISM-Adjusted General Business Conditions Index using the same methodology as the national ISM index. The reading surged from 59.3 to 64.5, the highest level since March 1973.

Amongst the subindexes, the delivery times index surged to 29.5 from 15.1. The new orders series jumped from 23.4 to 50.9, the highest level since March 1973. A sharply increased 57.9% of respondents reported higher orders while a lessened 7.0% reported fewer orders. The unfilled orders measure rose to 21.8, up from -0.9 seven months earlier. Shipments strengthened as well. The employment reading rose to 30.1, the highest reading since June 2018. A slightly higher 31.5% of survey respondents reported increased employment while a reduced 1.4% reported less hiring, the lowest percentage since October 2017.

On the pricing front, the index of prices paid surged to 75.9 in March, up from 7.2 twelve months earlier. It was the highest level since March 1980. A greatly increased 77.4% of respondents paid higher prices while 1.6% paid less. The index of prices received also improved.

The Philadelphia Fed also surveys expectations for business activity in six months. The Future Activity Index rose sharply to 61.6 in March with broad-based component improvement, notably for delivery speeds and employment. The future prices paid measure surged.

The survey panel consists of 150 manufacturing companies in the third Federal Reserve District (which consists of southeastern Pennsylvania, southern New Jersey and Delaware). The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease in activity. The ISM-adjusted figure, calculated by Haver Analytics, is the average of five diffusion indexes: new orders, shipments, employment, delivery times and inventories with equal weights (20% each). Each ISM-adjusted index is the sum of the percent responding "higher" and one-half of the percent responding "no change."

The figures from the Philadelphia Federal Reserve dating back to 1968 can be found in Haver's SURVEYS database. The expectation from the Action Economics Forecast Survey is available in AS1REPNA.

Philadelphia Fed - Manufacturing Business Outlook Survey (%, SA) Mar Feb Jan Mar'20 2020 2019 2018
General Factory Sector Business Conditions 51.8 23.1 26.5 -6.0 7.7 9.6 20.7
ISM-Adjusted Business Conditions 64.5 59.3 61.2 49.7 52.2 55.4 57.6
  New Orders 50.9 23.4 30.0 -3.6 8.6 13.7 20.6
  Shipments 30.2 21.5 22.7 7.0 9.6 16.6 22.6
  Unfilled Orders 21.8 12.6 25.6 -4.8 0.3 7.6 6.9
  Delivery Time  29.5 15.1 30.0 -7.0 5.1 9.4 9.5
  Inventories 12.1 20.0 12.6 -0.4 -0.2 5.0 7.3
  Number of Employees 30.1 25.3 22.5 5.9 4.9 16.8 21.3
  Average Workweek 39.7 30.6 18.6 3.2 4.3 9.7 15.8
  Prices Paid 75.9 54.4 45.4 7.2 16.7 19.6 46.1
Expectations - General Business Conditions; Six Months Ahead 61.6 39.5 52.8 36.8 46.3 28.4 36.8
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