Philly Fed Index Indicates Slower Growth In October

Manufacturing activity in the Philadelphia area saw slower growth in the month of October, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday.

The Philly Fed said its diffusion index for current activity fell to 23.8 in October from 30.7 in September, although a positive reading still indicates growth. Economists had expected the index to drop to 25.0.

The slightly bigger than expected decrease by the headline index came even though the new orders index surged up to 30.8 in October from 15.9 in September.

The number of employees index also rose to 30.7 in October from 26.3 in September, while the shipments index inched up to 30.0 from 29.9.

The Philly Fed noted the indicators for prices paid and prices received remained elevated, with the prices paid index climbing to 70.3 in October from 67.3 in September. The prices received index edged down to 51.1 from 52.9.

The report also showed the unfilled orders index jumped to 12.7 in October from 5.4 in September, while the delivery times index shot up to 32.2 from 20.4.

Looking ahead, the Philly Fed said future indexes suggest that the surveyed firms remained generally optimistic about growth over the next six months, with the diffusion index for future general activity rising to 24.2 in October from 20.0 in September.

“Voracious goods demand will keep factory assembly lines churning out products at a healthy clip,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

He added, “However, growth will be constrained by persistent supply chain disruptions, which we think will drag on activity well into 2022, with the risk of persisting into 2023.”

A separate report released by the Federal Reserve Bank of New York last Friday showed a notable slowdown in the pace of growth in regional manufacturing activity in the month of October.

The New York Fed said its general business conditions index tumbled to 19.8 in October from 34.3 in September. Economists had expected the index to pull back to 27.0.

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