Philly Fed Index Indicates Slower Growth In August

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A report released by the Federal Reserve Bank of Philadelphia on Thursday showed regional manufacturing activity continued to expand in the month of August, although the pace of growth slowed by more than anticipated.

The Philly Fed said its diffusion index for current activity dropped to 17.2 in August from 24.1 in July, but a positive reading still indicates growth in regional manufacturing activity. Economists had expected the index to dip to 21.0.

The bigger than expected decrease by the headline index came as the new orders index dropped to 19.0 in August from 23.0 in July and the shipments index slid to 9.4 from 15.3.

The number of employees index also tumbled to 9.0 in August from 20.1 in July, indicating a slowdown in the pace of job growth.

On the inflation front, the prices paid index edged down to 15.3 in August from 15.7 in July, while the prices received index inched up to 12.4 from 11.5.

The Philly Fed noted respondents remained optimistic about growth over the next six months, with the diffusion index for future general activity rising to 38.8 in August from 36.0 in July.

“Manufacturing activity is set to advance at a lackluster and uneven pace in the coming months amid a grim backdrop of weak demand, supply chain disruptions and elevated uncertainty,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

He added, “The virus is in the driver’s seat of the recovery, and manufacturing will not gain stronger momentum on a sustained basis until a health solution is found.”

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