Price Pressures Pick up in Philadelphia
In September, Philadelphia’s regional manufacturing activity expanded at a slower pace, with the index for general business activity falling from 47.4 to 37.8. This month, 45.3% of firms reported increases in activity, while 7.5% cited decreases. New order growth also slowed, moving down from 30.1 to 29.2, while the shipments index stayed the same at 27.7. Meanwhile, the employment index dropped 16.1 points to 11.8, and the average employee workweek index stepped down 8.5 points to 18.0. The prices paid and prices received indices both rose in September, moving from 40.9 to 48.6 and from 17.7 to 31.3, respectively. As has been the case for many months, the prices received index remained lower than the prices paid index, indicating that manufacturers have been absorbing a portion of higher costs paid.
Looking ahead, most indicators showing expectations for growth weakened in September. After surging 39.2 points in August, expectations for future business activity fell 20.7 points to 52.9 in September. The loss came primarily from a decline in the proportion of firms expecting an increase in activity (57.9%). At the same time, the number of firms anticipating a decrease in activity (5.0%) rose in September. The future new orders index edged down from 66.0 to 62.3, and the future shipments index declined from 63.5 to 61.1. Meanwhile, the capital expenditures index fell from 48.2 to 37.1. The future prices paid and prices received indices both increased, moving from 62.9 to 71.3 and from 59.8 to 72.3, respectively, with both indices remaining above their long-run averages. Additionally, the index for future employment surged from 35.4 to 50.6.
In September, firms were asked to estimate their production growth for the third quarter. Of those responses, 68% saw higher production compared to the second quarter, with 12% exhibiting an increase of 10% or more. At the same time, 16% experienced a decline in production, while another 16% saw no change. When asked about third quarter capacity utilization compared to the year prior, respondents reported a median utilization rate of 70–80%, unchanged from the same period last year. Looking forward, 36% of firms expect the impact of energy markets as a constraint on capacity utilization to worsen over the next three months.
