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Economy in Brief

Philadelphia Fed Manufacturing Index Strengthens in April
by Tom Moeller  April 15, 2021

• Headline index jumps to highest level since 1973.

• Underlying strength remains widespread.

• Prices paid ease.

The Federal Reserve Bank of Philadelphia's Factory Sector Business Conditions Index jumped to 50.2 during April following a rise to a revised 44.5 in March. Earlier data also was revised. It was the highest reading since April 1973. The Action Economics Forecast Survey expected a reading of 40.0. The percentage of firms reporting improving conditions rose to 58.6% after surging to 53.9% in March, while the share reporting weaker conditions fell to a lessened 8.4%.

Haver Analytics calculates an ISM-Adjusted General Business Conditions Index using the same methodology as the national ISM index. The reading improved to 63.0, the highest level since March 1973.

Amongst the subindexes, the employment reading rose to a record 30.8. A higher 35.1% of survey respondents reported increased employment while a reduced 4.2% reported less hiring. The unfilled orders measure surged to 27.2, nearly a 50-year high. Shipments and inventories also strengthened. Falling was the new orders measure to 36.0 from 38.2 and the average workweek to 29.8 from 36.4.

On the pricing front, the index of prices paid eased to 69.1 in April from 72.6 in March, but remained up from -9.3 twelve months earlier. A slightly lessened 71.4% of respondents paid higher prices while 2.3% paid less. The index of prices received improved.

The Philadelphia Fed also surveys expectations for business activity in six months. The Future Activity Index rose to 66.6 in April from 59.1 in March. Employment, new orders and shipments rose sharply. The future prices paid measure surged to the highest level since January 1989.

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) Apr Mar Feb Apr'20 2020 2019 2018
General Factory Sector Business Conditions 50.2 44.5 28.7 -56.6 7.9 9.9 20.9
ISM-Adjusted Business Conditions 63.0 61.4 61.4 29.7 52.3 55.5 57.7
  New Orders 36.0 38.2 25.7 -70.9 8.9 14.1 21.0
  Shipments 25.3 22.0 28.0 -74.1 9.7 16.9 22.8
  Unfilled Orders 27.2 19.3 13.9 -13.5 0.4 7.7 7.0
  Delivery Time  27.8 28.2 16.1 4.1 5.1 9.4 9.5
  Inventories 17.3 14.4 21.7 -10.2 -0.2 5.1 7.2
  Number of Employees 30.8 27.4 24.9 -46.7 5.0 16.9 21.5
  Average Workweek 29.8 36.4 30.4 -54.5 4.4 9.8 15.9
  Prices Paid 69.1 72.6 55.2 -9.3 16.6 19.7 46.1
Expectations - General Business Conditions; Six Months Ahead 66.6 59.1 40.0 43.0 46.3 28.4 36.8
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