Philadelphia Fed Factory Index Stabilizes in March

The Federal Reserve Bank of Philadelphia reported that its Composite Index of Business Conditions rose to -23.2 during March after plunging to -24.3 during February. The index remained near the lowest level since May 2020 and was below its peak of 45.6 in April of 2021. It has been negative for nine of the last ten months. A reading of -14.8 had been expected in the Action Economics Forecast Survey.

The ISM-Adjusted Composite Index, constructed by Haver Analytics, fell to 39.4 this month from 48.6 in February and, remaining below 50, continued to indicate a contraction in overall factory sector activity. It stood well below its high of 65.4 in November 2021.

The component series mostly weakened this month. The new orders series fell to -28.2 from -13.6 in February. A greatly lessened 7.0% of respondents reported orders improvement while a steady 35.2% reported orders deterioration. The shipments index fell sharply to -25.4 this month from +8.7 in February. It remained below 32.1 last May. A greatly lessened 5.8% of respondents reported shipments improvement while a sharply higher 31.2% reported a decline. The delivery times reading dropped to -24.3, indicating faster product delivery speeds. The unfilled orders index remained negative for the tenth straight month. The inventories index plummeted to -11.2 from +15.3, indicating a sharp pull-back in inventories.

On the labor front, the employment index fell to -10.3 in March, the weakest reading since May 2020. It remained well below its April 2022 peak of 38.4 as a greatly lessened 6.1% of respondents reported more hiring and a slightly increased 16.4% reported less. The hours-worked index plunged to -22.0 from -3.2 and remained below its high of +35.3 in March of 2021.

The prices paid index weakened to 23.5 from 26.5 in February. It has fallen from a high of 83.6 in November 2021. A slightly increased 34.8% of respondents reported higher prices while an increased 11.3% reported price declines. The prices received index fell sharply to 7.9 this month from 14.9 in February. It stood at its lowest point in nearly three years, down from a high of 65.8 in November 2021.

The future business conditions index declined to -8.0 this month from +-*/1.7 in February. This was the lowest level since October after rebounding to +4.9 in January. Movement amongst the component series was mixed. The new & unfilled orders, employment and inventories series each weakened while shipments and hours worked improved. The expected prices paid index rebounded after weakening sharply in February, but prices received plunged to a 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.