U.S. Philly Fed Manufacturing Index Slides Again in March
by:Sandy Batten
|in:Economy in Brief
Summary
- The headline index posted a second consecutive decline to a still positive 12.5.
- Shipments and orders fell markedly though remained positive.
- In contrast, employment jumped to 19.7, the highest reading since October 2022.
- Expectations six months ahead collapsed, falling to 5.6, its lowest reading since January 2024.
After having jumped to 44.3 in January, the FRB Philadelphia Manufacturing Business Outlook Survey fell for the second consecutive month to 12.5 in March. It had declined to 18.1 in February. The Action Economics Forecast Survey looked for a larger decline to 10.3 in March. While the declines in February and March were substantial, the index remains safely in positive territory, indicating continued expansion of economic activity in the Philly Fed district though at a slower pace. Just under 31% of firms reported an increase in activity in March, down from 41% in February. However, 18% reported a decline down from 23% in February. Survey responses were collected from March 10 to March 17.
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 50.5 in March, barely above the 50 level which separates expansion from contraction, from 55.3 in February. That is, activity continued to rise in March but at a meaningfully slower pace.
Looking at the components, the new orders index fell to 8.7 from 21.9 in February and 42.9 in January. The shipments index plunged to 2.0 in March from 26.3 in February and 41.0 in January. The pace of increase in delivery times slowed to 4.1 from 12.4. In contrast, employment indicators strengthened in March. The employment index jumped to 19.7, its highest reading since October 2022, from 5.3 in February. And the average workweek index rose to 8.7 from 2.9 in February.
The prices paid index increased nearly 8 points to 48.3, its fourth consecutive increase and highest reading since July 2022. Over 48% of the firms reported increases in input prices, while none reported decreases; 48% of the firms reported no change. The current prices received index moved down 3 points to 29.8. Thirty percent of the firms reported increases in prices received for their own goods, almost none reported decreases, and 66% reported no change.
Expectations of activity six months ahead fell 22 points to 5.6 in March, the lowest reading since January 2024, from 27.8 in February and 46.3 in January. The share of firms expecting an increase in activity over the next six months (31%) exceeded the share expecting a decrease (26%); 37% expect no change. The future new orders index dropped 31 points to 2.3, its lowest reading since May 2023, and the shipments index fell 25 points to 11.3, its lowest reading since June. The firms continue to expect an overall increase in employment, but the future employment index declined from 23.7 to 17.3. The future capital expenditures index was little changed at 13.4.
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.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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