Philly Fed: Manufacturing Expanded Strongly in June Once Again

The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded strongly in June once again. The composite index of general business activity decreased from 38.8 in May to 27.6 in June. To illustrate this recent progress, the headline index has averaged 31.4 through the first half of 2017, peaking at 43.3 in February, which was the best reading since November 1983. For comparison purposes, the average in the second half of 2016 was 9.1. In fact, growth in new orders (up from 25.4 to 25.9) accelerated in June, with nearly 45 percent of survey respondents saying that demand had risen since May. At the same time, other measures softened a bit in this release, even as they continued to expand at decent rates. Those included shipments (down from 39.1 to 28.5), employment (down from 17.3 to 16.1) and the average workweek (down from 21.7 to 20.5).

Meanwhile, manufacturers in the Philadelphia region remained quite optimistic about the next six months despite the forward-looking composite index falling from 59.5 in March—a 31-month high—to 31.3 in June. In this release, 47.5 percent and 49.6 percent expect new orders and shipments to rise in the coming months, respectively, with at least one-third seeing better hiring and capital spending. In a series of special questions, more than 60 percent predict a stronger second quarter, and 54.4 percent foresee a further acceleration in the third quarter. Those are uplifting statistics for the sector. On the downside, business leaders also see pricing pressures remaining elevated, even with some deceleration from previous months.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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