Philadelphia Fed Manufacturing Index Turns Negative in September

The Philadelphia Federal Reserve Bank reported in its September survey of manufacturing activity that the Current Activity Diffusion Index of -13.5 this month compared to 12.0 in August and -13.5 in July. It remained up from a low of -31.3 in April. The figure compared to expectations for -0.7 in the Action Economics Forecast Survey. The Philly Fed survey responses were collected from September 11 to September 18.

The ISM-Adjusted Composite Index, calculated by Haver Analytics from the survey results, fell to 47.2 in September from 49.3 in August, though it remained up from 44.2 in July, still suggesting a net contraction in activity. It compared to a March low of 39.4.

Changes in the component series of the diffusion index remained mixed. New orders fell to -10.2 from 16.0 in August. A lessened 19.1% of respondents reported an increase in new orders while a greater 29.3% reported a decline. The shipments index fell to -3.2 from 5.7, as 20.3% reported increased shipments and 23.5% reported declines. Unfilled orders fell to -13.6 from -4.8 in August and was negative for the fourth straight month. The delivery times index also moved down to -14.9 from -7.0 as 9.5% of respondents reported quicker speeds and 24.4% reported a slowdown. To the upside, the inventories reading jumped to 8.9 this month after three straight months of negative readings as 26.6% of respondents raised inventory levels and 17.7% lowered them.

Job market conditions deteriorated this month as indicated by an employment reading of -5.7 compared to -6.0 in August. These figures are, however, improved from a low of -10.3 in March. Fourteen percent of survey respondents raised employment while a higher 19.2% reduced it. Moving down, the hours-worked figure declined to 4.7 from 6.3 in August. Seventeen percent of survey respondents raised hours while twelve percent lowered them.

The index of prices paid strengthened this month, moving to 25.7 after August’s improvement to 20.8. It was the highest level since February, up from a low of 8.2 in April. This reflected 26.2% of respondents reporting increased prices and 0.5% lower prices in September. Also edging up this month, the prices received index rose to 14.8 from 14.1. It remained up from a low of -7.0 in May. A fewer 24.7% of respondents reported price increases and a lessened 9.9% reported declines.

Expectations for business conditions in the next six months improved to a reading of 11.1 after falling sharply to 3.9 in August. It remained down, however, from 29.1 in July. The September survey showed moderate improvement in expectations for new orders, shipments and inventories. Employment expectations deteriorated along with the workweek & unfilled orders. Expectations for prices paid eased following August’s sharp improvement while prices received also slipped.

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.