The Federal Reserve Bank of Philadelphia reported that manufacturing activity remained strong in April, even as headline growth has continued to pull back from February’s pace, which was the best reading since November 1983. The composite index of general business activity has decreased from 43.3 in February, to 32.8 in March, to 22.0 in April. Despite the easing in the composite and many of the underlying measures, the data continued to signal a healthy expansion in the district, including new orders (down from 38.6 to 27.4), shipments (down from 32.9 to 23.4), employment (up from 17.5 to 19.9) and the average workweek (up from 18.5 to 18.9). The rate of hiring growth was the fastest since May 2011. On the downside, there have been rising pricing pressures of late (down from 40.7 to 33.7), even as the index for prices paid decelerated somewhat from its highest level in nearly six years.
There were similar results in the forward-looking measures, with the expectations composite index down from 59.5—a 31-month high—to 45.4. Still, manufacturers in the Philadelphia region remained very optimistic in their outlook for the next six months. More than 59 percent of respondents felt that new orders would increase over the next six months, with 54.9 percent predicting more shipments. More importantly, especially given the cautious hiring and investing across the past year, at least 40 percent of respondents see more employment and capital expenditures growth moving forward. In a special question, 63.3 percent of manufacturers in the district said that, if they had plans to increase capital spending this year, it would take place in the second half of 2017.
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