Philly Fed Manufacturing Activity Continued to Decline in November

The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia rose to -1.7 in November from -12.8 in October. The survey covers the third Federal Reserve District. A reading of -1.0 for November had been expected in the Action Economics Forecast Survey. There was a clear dichotomy across respondents. Twenty-nine percent reported an increase in activity in November, up from 12.4% in October. However, 31% reported a decrease in activity, up from 25% in October. Responses to this month's survey were collected from November 10 to November 17.

The headline index is the answer to just one question: whether activity increased, decreased or was unchanged. Haver Analytics calculates an ISM-adjusted current activity diffusion index from the five key components using the methodology employed to construct the national ISM index. This figure fell to 48.3 in November from 53.5 in October, below the critical 50 level that separates contraction from expansion for the first time in three months and indicating that the component indexes were actually a little weaker than the headline index.

For the component indexes, the shipments index fell to -8.7 in November, its first negative reading since May, from 6.0 in October. The percentage of respondents reporting an increase in shipments fell to 21.5% from 24.1% while the percentage reporting a decrease jumped to 30.2% from 18.1%. The new orders index also fell markedly to -8.6 in November from 18.2 in October. The percentage of respondents reporting an increase in orders fell to 25.6% from 34.5% while the percentage reporting a decrease surged to 34.2% from 16.2%. Delivery times shortened as that index fell to -4.3 in November from 6.6 in October.

Respondents continued to report overall increases in employment, and the employment index ticked up to 6.0 from 4.6. Most firms continued to report no change in employment levels (74.8%, down from 80.9% in October), while the share of firms reporting increases (15.6%) exceeded the share reporting decreases (9.6%). The average workweek index fell from 12.8 in October to 3.7 in November.

The prices paid index remained elevated and increased nearly 7 points to 56.1, its highest reading in three months. Most firms (58.6%) reported increases in prices paid, only 2.5% of respondents reported decreases, and 38.7% reported no change. The current prices received index fell 9 points to 17.7, more than offsetting last month’s increase. While this was its lowest reading since last December, it remained above its long-run average.

The diffusion index for future general activity increased to 49.6 in November, its highest reading in a year, from 36.2 in October. The future new orders index rose to 55.6, its highest reading since January, and the future shipments index was unchanged at 48.4. Both future price indexes remained elevated and moved higher. The future capital expenditures index edged up 2 points to 26.7.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The series from the survey dating back to May 1968 can be found in Haver's SURVEYS database. The expectations forecast figures are from the Action Economics Forecast Survey in AS1REPNA.