The Federal Reserve Bank of Philadelphia said that manufacturing activity continued to expand strongly in October.
The composite index of general business activity increased from 23.8 in September to 27.9 in October, a five-month high. The tightening labor market continued to be one of the bright spots, with accelerations in both hiring (up from 6.6 to 30.6) and the average workweek (up from 11.9 to 19.4). More than 30 percent of respondents said that their employment had increased in October, up from 18.4 percent in the September report, with none citing declining employment.
With that said, growth for new orders (down from 29.5 to 19.6) and shipments (down from 37.8 to 24.4) pulled back somewhat in the latest survey, albeit at rates that still reflected robust growth.
Meanwhile, manufacturers in the Philadelphia Fed region remained quite optimistic about the next six months, even with some easing in many of the key measures.
The forward-looking composite index decreased from 55.2 to 46.4 but continued to be highly elevated. More than half of those completing the survey felt that new orders and shipments would rise in the coming months, with 42.9 percent and 37.7 percent seeing more hiring and capital spending. The expectations measure for employment was the highest since February 1984. The average expected capacity utilization rate in 2018, based on a special question in this month’s release, was 76.9 percent, up from 75.0 percent in a similar question last year. Business leaders in the Philly Fed district see pricing pressures for raw materials (up from 46.2 to 60.2) accelerating strongly in the next six months.