Commentary Directory

The Philadelphia Fed September Manufacturing Business Outlook Survey indicates a downturn in the region's manufacturing sector. The current general activity index fell into negative territory, dropping from 12.0 in August to -13.5 in September, marking its 14th negative reading in the past 16 months. While firms reported overall price increases, most indicated no change in prices, with price indexes staying close to their long-term averages. Employment saw a decline, with the employment index remaining at -5.7. Special questions revealed that 37% of firms reported an increase in production for Q3 2023, matching the percentage that reported a decrease. Despite the current downturn, future indicators suggest a more optimistic outlook, with the diffusion index for future general activity rising from 3.9 in August to 11.1 in September.

The Philadelphia Fed index dropped back from a recent bounce in August to return to contractionary territory. The positive reading last month was the first since September 2022. There was a major shift back down in the New Orders index which points to a continued decline in manufacturing demand. Despite there being a decline in demand and activity, price pressures increased. The rise in the Prices Paid index likely came from the recent rise in energy prices, and that caused firms to keep their prices charged on a slight rise. Most firms’ employment was unchanged (67.3%) but there was a slight edge in the percentage who saw a decline in employment compared to the percentage who saw an increase. A slight moderation in the index was what was expected, but this sharp 25 point decline was a downside surprise.