Philadelphia Fed Factory Index Falls Sharply during April

The Federal Reserve Bank of Philadelphia reported that its Composite Index of Business Conditions declined to -31.3 during April after improving slightly to -23.2 in March. The index remained was at its lowest level since May 2020 and was below its peak of 45.6 in April of 2021. It has been negative for ten of the last eleven months. A reading of -19.2 had been expected in the Action Economics Forecast Survey. The survey responses were collected from April 10 to April 17.

The ISM-Adjusted Composite Index, constructed by Haver Analytics, improved to 42.2 this month from 39.4 in March. It remained below the break-even level of 50 and continued to indicate contraction in overall factory sector activity. It stood well below its high of 65.4 in November 2021.

The component series remained mostly below zero this month. The new orders series rose to -22.7 from -28.2 in March. An improved 15.2% of respondents reported more orders while an increased 37.9% reported orders deterioration. The shipments index of -7.3 compared to -25.4 in March and remained below the latest high of 32.1 last May. A greatly increased 20.4% of respondents reported shipments improvement while a lessened 27.7% reported a decline. The unfilled orders series rose to -11.1 from -21.3 but has been negative since June 2022. The delivery times reading eased to -25.0, indicating the quickest product delivery speeds since March 2009. The inventories index declined sharply to -17.9 from -11.2, indicating an acceleration in the pace of inventory decumulation.

On the labor front, the employment index improved to -0.2 in April. It remained well below its April 2022 peak of 38.4. An increased 16.0% of respondents reported more hiring and a steady 16.2% reported less. The hours-worked index rose to -8.4 after plunging to -22.0 in April. It remained below its high of +35.3 in March of 2021.

The prices paid index fell sharply to 8.2 this month from 23.5 in March. It has fallen from a high of 83.6 in November 2021. A greatly lessened 18.5% of respondents reported higher prices while an easier 10.3% reported price declines. The prices received index fell sharply to -3.3 this month from +7.9 in March. It remained down from a high of 65.8 in November 2021. Seven percent of respondents reported price increases, down from 22.8% in March, while a slightly lessened 10.4% reported price declines.

The future business conditions index of -1.5 this month compared to -8.0 in March. Movement amongst the component series was mixed. The new orders, shipments & inventory series improved while unfilled orders, delivery times, employment and hours worked deteriorated. The expected prices paid index weakened last month, but prices received improved modestly from its seven-year low.

These diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The Philadelphia Fed data can be found in Haver's SURVEYS database. The expectations figures are from the Action Economics Forecast Survey in AS1REPNA.

The Fed’s latest Beige Book covering regional economic conditions can be found here.