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Economy in Brief

Philadelphia Fed Manufacturing Index Rebounds in September
by Kathleen Stephansen, CBE  September 16, 2021

• Indices for general activity and shipments improved in September.

• Employment indicators softened.

• Price indices remain elevated.

The Federal Reserve Bank of Philadelphia's Manufacturing Business Conditions Index jumped 11 points in September to 30.7 from 19.4 in August. The index peaked at 50.2 in April. A reading of 18.9 had been expected by the Action Economics Forecast Survey. The percentage of firms reporting improving conditions rose to 33.6% from 28.0% in August, while the share reporting weaker conditions dropped to 2.9% from 8.5% in August. The share reporting no change edged up to 60.6% from 59.3% in August.

Haver Analytics calculates an ISM-Adjusted General Business Conditions Index using the same methodology as the national ISM index. That reading rose to 59.4 from 57.4 in August. It peaked at 63.0 in April.

Performance of the subindexes was relatively mixed: The new orders index dropped to 15.9 in September from 22.8 in August, but the shipments index jumped to 29.9 from 18.9 in August. The unfilled orders and delivery times posted respective declines to 5.4 and 20.4. The inventory index jumped to 19.2 from a decline of 18.1 in August.

The employment index declined to 26.3 in September from 32.6 in August. On balance though, firms continued to report increases in employment. Thirty-one percent of respondents reported more hiring in September, while only 5% percent of firms lowered employment in September. The average workweek reading rose to a four-month high of 29.3 from 24.5 in August.

The indicators for prices paid and prices received remained elevated even though they posted small declines. The index of prices paid eased to 67.3 in September from 71.2 in August. The highest reading since 1979 was in June when the index reached 80.7. Seventy-one percent of respondents reported paying higher prices versus 74.0% in August, while 4.0% reported paying less from 2.6% in August. The index of prices received eased to 52.9 this month from a near-record 53.9 in August.

The Philadelphia Fed also surveys expectations for business activity in the coming six months. The expectations index for future activity index dropped to 20.0 in September from 33.7 in August, the third consecutive monthly decline. Expected new orders dropped to 32.1 in September from 38 in August; shipments rose slightly to 41.6 from 40.8, while employment declined to 38.6 from 42.7 last month. The expected prices paid index edged down to 53.5 from 54.6 and prices received declined to 62.2 from 70.1 in August.

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) Sep Aug Jul Sep'20 2020 2019 2018
General Factory Sector Business Conditions 30.7 19.4 21.9 15.0 7.9 9.9 20.9
ISM-Adjusted Business Conditions 59.4 57.4 59.0 57.3 52.3 55.5 57.7
  New Orders 15.9 22.8 17.0 25.5 8.9 14.1 21.0
  Shipments 29.9 18.9 24.6 36.6 9.7 16.9 22.8
  Unfilled Orders 5.4 7.0 19.0 0.4 0.4 7.7 7.0
  Delivery Time  20.4 26.3 33.3 12.2 5.1 9.4 9.5
  Inventories 19.2 -18.1 -4.0 -10.8 -0.2 5.1 7.2
  Number of Employees 26.3 32.6 29.2 15.7 5.0 16.9 21.5
  Average Workweek 29.3 24.5 18.4 7.8 4.4 9.8 15.9
  Prices Paid 67.3 71.2 69.7 25.1 16.6 19.7 46.1
Expectations - General Business Conditions; Six Months Ahead 20.0 33.7 48.6 56.6 46.3 28.4 36.8
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