Philly Fed Manufacturing Index Rises Further in October

The Current General Activity Diffusion Index rose to 10.3 in October from 1.7 in September, according to the Manufacturing Business Outlook Survey (MBOS) from the Federal Reserve Bank of Philadelphia, indicating further improvement in activity in the third Federal Reserve District this month. A reading of 3.0 had been expected in the Action Economics Forecast Survey. Twenty-four percent of the firms reported increases in general activity in October (up from 21.9% in September) while 14.0% reported decreases (down from 20.2% in September). Responses to this month's survey were collected from October 7 to October 14.

The headline index reflects the answer to a single question about business conditions. Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology along the lines of the national ISM index. The index rebounded to 52.7 in October from 49.3 in September, indicated that the rise in activity was relatively broad based.

The new orders index rebounded to 14.2 in October after having fallen to -1.5 in September with 30.5% of respondents reporting an increase in orders while only 16.3% reported a decline, the lowest since August 2023. Similarly, the shipments index bounced back to 7.4 in October from -14.3 in September. Twenty-seven percent of respondents reported an increase in shipments while 19.8% reported a decline. Unfilled orders rose but remained negative for the second consecutive month at -1.5. Delivery times lengthened to 10.2 in October from -0.7 in September. Inventory investment continued but the pace slowed with the index falling to 0.5 in October from 5.0 in September.

Employment conditions weakened in October with the number of employees’ index falling to -2.2 from 10.7 in September. Eleven percent of respondents reported an increase in employment, the same as last month, while 12.9% reported a decline versus 0% last month. The average workweek index rose slightly but remained decidedly negative at -11.8.

Both price indexes declined in October but remained positive. The prices paid index declined from 34.0 to 29.7. Nearly 35% of the firms reported increases in input prices, while 5.0% reported decreases; 60.0% of the firms reported no change. The current prices received index decreased 7 points to 17.9. Almost 22 of the firms reported increases in prices received for their own goods, 3.8% reported decreases, and 71.9% reported no change.

The future activity index jumped up to 36.7 this month, its highest reading in three months, from 15.8 in September. Apart from inventories, all other components posted solid increases, led by new orders and shipment.

In this month’s special question, manufacturers were asked about their plans for different categories of capital expenditures next year. Almost 52% of the firms expect to increase total capital spending, compared with 21% that expect to decrease total spending; 27% expect total spending to stay the same. When this question was asked last year, the share of firms expecting to decrease spending slightly exceeded the share of firms expecting to increase spending (30% versus 24%). On balance, the firms expect higher capital expenditures next year for computer and related hardware, software, noncomputer equipment, and energy-saving investments, and lower expenditures on structure and other investments.

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 figures are from the Action Economics Forecast Survey in AS1REPNA.