U.S. Philadelphia Fed Factory Index Strengthens in September; Prices Weaken

The Current Activity Diffusion Index from the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia, increased to 23.2 in September from -0.3 in August. The survey covers the third Federal Reserve District. A reading of 3.0 for September had been expected in the Action Economics Forecast Survey. A higher 39.9% of firms reported increases in general activity in September, up from 29.9% in August, while a nearly halved 16.7% reported declines. Responses to this month's survey were collected from September 8 to September 15.

Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology along the lines of the national ISM index. This reading rose to 55.0 in September from 49.1 in August. It was the highest level since February, up from an April low of 43.6.

In the latest survey, the new orders index strengthened to 12.4 in September after falling sharply to -1.9 in August. A greater 41.7% of respondents reported higher new orders while a lessened 29.3% reported declines. The shipments index surged to 26.1 after falling to 4.5. It was the highest level in seven months as an increased 44.0% of respondents reported higher shipments and 17.9% indicated declines. The inventories measure surged to 15.0, a roughly four-year high, while the unfilled orders measure rose to -6.6 this month after collapsing to -16.8 in August. The delivery times reading improved to -3.4 last month after falling to -5.4 in August, but remained well below the high of 13.6 in June.

Working the other way, the employment index eased to 5.6 in September after falling to 5.9 in August. It was down from a high of 16.5 in May. A steady 15.8% of respondents reported increases in employment in September while a higher 10.2% reported declines. The average workweek index surged to 14.9 last month after rising to 4.7 in August. A three-year high 22.9% of respondents reported longer hours while a lessened 8.0% reported a decline.

Inflation measures weakened in September. The prices paid index declined to 46.8, a three-month low, after surging to a three-year high of 66.8 in August. A greatly lessened 48.8% of respondents reported increases in prices in September while a higher 2.0% of respondents reported a decline. The prices received index roughly halved to 18.8 after rising to 36.1 in August. A greatly lessened 19.5% of respondents reported increases in prices received while a minimally higher 0.7% reported declines.

The Future Activity Index over the next six months increased to 31.5 in September after rising to 25.0 in August. It was a four-month high. A greater 52.2% of respondents expected an increase in activity while a higher 20.8% expected a decline. Component declines were mixed. New orders rose to a four-month high but shipments fell. Unfilled orders rose but delivery times weakened. The inventory index improved but the future capital expenditure measure fell. The future employment reading strengthened while the future hours worked measure surged to an eleven month high. The future prices paid index edged up after falling sharply in April while the future prices received measure jumped to a five-month high.

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.