Philly Fed Manufacturing Activity Rebounds in January
by:Sandy Batten
|in:Economy in Brief
Summary
- The headline index increased to 12.6 in January, the highest reading since September, from -8.8 in December.
- Both new orders and shipments increased in January.
- Delivery times lengthened while the pace of input price increases slowed.
- Employment decreased but remained in positive territory, indicating further gains in employment though at a slower pace.
The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia rose to 12.6 in January from -8.8 in December. The survey covers the third Federal Reserve District. A reading of -4.5 for January was expected by the Action Economics Forecast Survey. Over 23% of respondents reported increases in activity in January (up from 21% last month), exceeding the 11% reporting decreases (down from 30%); 63% of the firms reported no change in current activity (up from 50%). Survey responses were collected from January 5 to January 12.
The headline index is the answer to just one question: whether activity increased, decreased or was unchanged from the previous month. 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 rose to 52.9 in January from 52.5 in December, inching further above the critical 50 value that separates contraction from expansion.
For the component indexes, the new orders index rose to 14.4 from 5.7 in December. The percentage of respondents reporting an increase in orders edged up to 28.3% in January from 27.4% in the prior month while 13.9% reported a decrease, down markedly from 21.7% in December. The shipments index increased to 9.5 in January from 3.2 in December. The percentage of respondents reporting an increase in shipments rose slightly to 27.3% from 26.2% while the percentage reporting a decrease fell to 17.8% from 23.0%. Delivery times lengthened marginally to 7.3 in January from 5.2 in December. The inventories index fell 17 points to -8.4 in January, its lowest level since July 2024.
Respondents continued to report overall increases in employment with the employment index remaining in positive territory. However, the index fell to 9.7 in January from 13.0 in December, indicating that gains in employment slowed in the latest month. The percentage of respondents reporting an increase in employment rose to 19.8% from 13.6% in December but the percentage reporting a decline jumped to 10.1% in January from 0.6% in December. The average workweek index fell from 12.5 in December to 9.1 in January.
On balance, the firms continued to report overall increases in prices. The prices paid index edged down 2 points to 46.9 in January, its second consecutive decrease and its lowest level since June. Nearly 47% of respondents reported increases in input prices, while none reported decreases; 53% reported no change. The current prices received index ticked up 2 points to 27.8. More than 31% of respondents reported increases in the prices of their own goods, 3% reported decreases, and 66% reported no change.
The diffusion index for future general activity declined from a revised reading of 38.1 in December to 25.5 in January, its lowest reading since July. Nearly 35% of respondents expect an increase in activity over the next six months (down from 53% last month), exceeding the 9% that expect a decrease. The future new orders index fell 6 points to 32.9, while the future shipments index ticked up 1 point to 40.8. On balance, the firms continue to expect increases in employment over the next six months with the future employment index rising 4 points to 28.8. Both future price indexes were well above their long-run averages: The future prices paid index rose 2 points to 66.6; the future prices received index moved up 5 points to 61.8. The index for future capital expenditures edged up 1 point to 30.3.
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 indexes range from -100 to +100 with positive values indicating an increase in activity. 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.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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