Philadelphia Fed Manufacturing Index Is Little Changed in July; Expectations Improve

The Philadelphia Federal Reserve Bank reported in its survey of manufacturing activity that the Current Activity Diffusion Index of -13.5 in July compared to -13.7 in June, but was increased from a low of -31.3 in April. The figure compared to expectations for -10.4 in the Action Economics Forecast Survey. The Philly Fed survey responses were collected from July 10 to July 17.

The ISM-Adjusted Composite Index, calculated by Haver Analytics from the survey results, was 44.2 in July, down from 46.6 in June suggesting a net contraction in activity, but was less weak than the March low of 39.4.

Changes in the component series of the diffusion index were mixed. New orders were still negative at -15.9 compared to -11.0 in June. Eighteen percent of respondents reported an increase in new orders while 45.9% had no change and 34.2% reported a decline. Shipments weakened sharply to -12.5, as 16.6% reported increased shipments and 29.1% reported declines. Unfilled orders improved slightly to -15.1 from -18.5 in June. Inventories also moved up slightly to -1.0 from -3.5 as 13.2% of respondents raised inventory levels and 14.2% lowered them. The delivery times index edged higher to -12.9 from -16.1 as 7.8% reported an increase in deliveries and 20.7% reported a decline.

Employment conditions also deteriorated this month as indicated by a reading of -1.0 compared to -0.4 in June. These figures are, however, improved from a low of -10.3 in March. Thirteen percent of survey respondents raised employment while 14.0% reduced it. The hours-worked figure actually improved to -3.0 from -8.2 in June. It was the least negative of the last six readings. Nine percent of survey respondents raised hours but twelve percent lowered them.

The index of prices paid also weakened this month, moving to 9.5 after June’s 10.5 level. This reflected 20.1% of respondents increasing prices and 10.5% decreasing them in July. Prices received in July, at 23.0, showed the strongest reading in six months. It was increased from a low of -7.0 in May. A greater net 28.8% of respondents reported higher prices while a lessened 5.8% reported a decline.

Expectations for business conditions in the next six months improved greatly to a reading of 29.1 versus 12.7 in June. It was the highest figure since July 2021. The July survey showed greatly improved expectations for new orders, shipments, unfilled orders and employment. Expectations for prices paid also improved sharply while prices received edged higher.

The 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 forecast figures are from the Action Economics Forecast Survey in AS1REPNA.