U.S. Philadelphia Fed Index Falls to a Five-Month Low in June
Summary
- Despite the June drop, Current General Activity Index (1.3) remains in positive territory, suggesting expansion.
- Key subindexes remain negative: Shipments (-7.2), New Orders (-2.2), and Employment (-2.5).
- Inflation indicators suggest widespread price increases.
- Future General Activity Index (13.8) remains in positive territory, albeit w/ less widespread expectations for overall future growth.
The current general activity diffusion index fell to 1.3 in June from 4.5 in May, according to the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia, indicating mostly steady manufacturing activity in the Third Federal Reserve District this month. The June reading registered the third m/m fall in four months to the lowest level since January but remained in positive territory for the fifth straight month; it was above -13.6 in June 2023. A decline to 4.0 for June had been expected by the Action Economics Forecast Survey. Twenty-four percent of the firms reported increases in general activity in June (down from 29.2% in May), while 22.7% reported decreases (down from 24.7%); 50.2% reported no change (up from 46.1%). Responses to this month's survey were collected from June 10 to June 17.
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 moved up to 47.0 in June, still below 50, after falling to 46.4 in May, showing a string of contraction since September 2022; it was slightly up from 45.8 in June 2023.
In the latest survey, the new orders index rose to -2.2 in June, the second successive negative reading, after a 20.1-point drop to -7.9 in May, while the shipments index plummeted to -7.2, the lowest level since December, on top of a 20.3-point plunge to -1.2. The inventories index increased to -6.4 in June after falling to -10.1 in May, staying negative for the third consecutive month. The unfilled orders index rebounded to 8.9 this month, the highest level since May 2022, from -11.5 in May. Meanwhile, the delivery times index fell back to -9.4 in June after rising to -0.8 in May.
On the labor front, the number of employees index increased to -2.5 in June, the eighth straight negative reading, from -7.9 in May, suggesting an overall decrease in employment levels. Eleven percent of respondents reported increases in employment in June while 13.9% reported lower employment. The average employee workweek index jumped to 4.8 in June after increasing to -8.3 in May, registering the first positive reading since February and the highest since October 2022.
Inflation indicators remained elevated this month. The prices paid index rose to 22.5 in June after falling to 18.7 in May. A higher 25.7% of respondents reported increases in input prices in June while only 3.2% reported decreases. The prices received index jumped to 13.7 in June, the highest level since July 2023, after rising to 6.6 in May. A higher 13.7% of respondents reported increases in the prices of their own goods while no respondent reported decreases.
The future indicators generally remained in positive territory but showed less widespread expectations for overall growth over the next six months. The future general activity diffusion index declined to a four-month-low 13.8 in June after falling to 32.4 in May; however, posting positive readings for five successive months. The following future indexes fell in June (vs. May) but remained in positive territory: unfilled orders (12.2 vs. 26.7), new orders (16.2 vs. 39.7), and employment (19.0 vs. 21.7). The future capital expenditures index fell to 12.1 in June from 20.1 in May; nevertheless, staying positive for six consecutive months. To the negative side, the future shipments index plunged to -0.1 in June, the lowest reading since November 2008, from a three-year-high 46.2 in May; the future inventories index slid to -24.2, the lowest level since April 2009, from May’s 9.4. Prices continued to increase, with the future prices paid index rising to 56.3 in June, a two-year high, from 35.4 in May and the future prices received index rising to 58.8, the highest level since April 2022, from May’s 31.4.
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 forecast figures are from the Action Economics Forecast Survey in AS1REPNA.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has ~20 years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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