U.S. Philly Fed Manufacturing Index Plunged in April

Business sentiment in the Philadelphia Federal Reserve district turned decidedly negative in April with the general business conditions index plummeting to -26.4, the lowest reading since April 2023, from 12.5 in March. The Action Economics Forecast Survey looked for a decline to +5.0 in April. The index is a diffusion index centered on zero. So, negative readings indicate that activity is falling. In April, nearly 39% of respondents reported a decrease in activity, up from 18.1% in March, while only 12.5% reported an increase versus 30.6% in March. Survey responses were collected from April 7 to April 14.

The headline index reflects the answer to a single question. Haver Analytics calculates a composite index using the methodology employed in the construction of the national ISM index. That index fell to 43.6 in April, well below the 50 level which separates expansion from contraction, from 50.5 in March. That is, activity fell in April for the first time in four months.

Looking at the components, the new orders index plunged to -34.2, its lowest reading since April 2020, from 8.7 in March. Nearly 45% of respondents reported a decline in orders while only 10.7% reported an increase. The shipments index fell to -9.1 in April, its first negative reading since last September, from 2.0 in March. Employment conditions deteriorated markedly. The employment index fell nearly 20 points to 0.2 from 19.7 in March. The average workweek index plummeted to -12.7, its first negative reading in four months, from 8.7 in March. The pace of delivery times fell for the first time in five months with the index declining to -2.6 in April from 4.1 in March.

The inflation environment remained relatively heated. The prices paid index edged up from 48.3 to 51.0, its highest reading since July 2022. Almost 54% of the firms reported increases in input prices, while 3% reported decreases; 36% reported no change. The current prices received index ticked up almost 1 point to 30.7 from 29.8. Almost 31% of the firms reported increases in the prices of their own goods, none reported decreases, and 64% reported no change.

After having fallen more than 22 points to 5.6 in March, the expectations index edged up to 6.9 in April. This index has fallen markedly over the past six months from 53.9 last November. Nearly 36% of the firms expect an increase in activity over the next six months, exceeding the 29% that expect a decrease; 25% expect no change. The future new orders index increased 4 points to 6.6, and the future shipments index decreased 6 points to 5.0, its lowest reading since June 2024. The future employment index fell 18 points to -0.6, its lowest reading since February 2016. The future prices paid index climbed to 63.1, and the future prices received index jumped 28 points to 67.7, its highest reading since June 2021. The index for future capital expenditures fell 11 points to 2.0. Nearly three-quarters of the firms expect no change in capital spending over the next six months.

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.