U.S. Philly Fed Manufacturing Index Rebounds in May
by:Sandy Batten
|in:Economy in Brief
Summary
- The headline index rebounded to -4.0 in May after plunging to -26.4 in April.
- Orders rebounded into positive territory while shipments fell further.
- Prices paid rose further, and employment rebounded.
- In contrast, after having fallen significantly since January, expectations six months ahead shot up in April.
Business sentiment in the Philadelphia Federal Reserve district rebounded modestly in May with the general business conditions index rising to -4.0 after having plummeted to -26.4 in April. Even with the rebound, the May reading point to declining business activity. The Action Economics Forecast Survey looked for a smaller increase to -13.1 in May. Twenty-three percent of the firms reported decreases in general activity this month versus 39% last month, while 19% reported increases (up from 13%); 58% reported no change (up from 41% last month). Survey responses were collected from May 5 to May 12.
The headline index reflects the answer to a single question. Haver Analytics calculates a composite index using the methodology employed in the construction of the national ISM index. That index rose to 50.7 in May, edging above the 50 level which separates expansion from contraction, from 43.6 in April. So, while the headline index pointed to declining activity in May, the ISM-like composite index indicated a slight expansion in activity.
Looking at the components, the new orders index rose 42 points to 7.5, offsetting nearly all of April’s decline. The shipments index declined for the fourth consecutive month, falling 4 points to -13.0, its lowest reading since November 2023. Firms reported overall increases in employment, and the employment index rose 16 points to 16.5 in May. Most firms continued to report no change in employment levels (68%), while the share of firms reporting increases (23%) exceeded the share reporting decreases (7%). The average workweek index rose from -12.7 to 2.0.
Both price indexes rose to their highest readings since June 2022. The prices paid index increased for the sixth consecutive month to 59.8. The current prices received index rose from 30.7 to 43.6. Almost 44% of the firms reported increases in prices received, no firms reported decreases, and 56% reported no change.
The outlook in six months brightened significantly in this report. The diffusion index for future general activity jumped 40 points to 47.2 in May after two months of low readings. Similarly, the future new orders index rose to 49.7, and the future shipments index rose to 51.1. Both future price indexes moved lower but remained elevated. The future employment index rose from -0.6 to 23.0. The future capital expenditures index rose 25 points to 27.0. More than 30% of the firms expect to increase capital spending over the next six months, up sharply from 12% last month.
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.
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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