Philly Fed index ticks up but remains negative

Manufacturing production in the Philadelphia region deteriorated more than expected in October, according to a survey released on Thursday.

The Philadelphia Fed index for current manufacturing activity edged up one point to -8.7, coming in below expectations for a reading of -5.0. This marked the fourth negative reading in five months.

Nearly 24% of firms reported declines in general activity in October, while 15% reported increases. Most firms - 55% - said there had been no change.

The index for new orders edged up two points to -15.9, while the current shipments index was essentially unchanged at 8.6 in October, its lowest reading since May 2020.

The employment index rose to 28.5 this month from 12.0 in September, with just over 29% of firms reporting increases in employment, up from 15% a month ago.

The prices paid gauge rose seven points to 36.3, while the index for current prices received edged up one point to 30.8.

The diffusion index for future general activity fell to -14.9 in October from -3.9 a month earlier, marking the fifth consecutive negative reading.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: "The small rise in the Philly Fed headline is a little disappointing, but is still better than the sharp fall in the Empire State on Monday. And the details are better than the headline; the average level of the key sub-components rose by more than the headline, suggesting scope for a modest uptick in the national ISM manufacturing index, as our chart below shows.

"Remember, though, that no single regional survey is definitive evidence of anything; the samples are small - only about 100 firms - and local, so are only loosely reflective of national manufacturing activity, at best. It’s tempting to lean more towards the Philly Fed than the Empire State on this occasion, given the clear rising trend in the recent hard output data, but we will reserve judgement on the health of US manufacturing in October until the other regional surveys are released."