The Philadelphia Federal Reserve’s August Business Outlook Survey was released this morning, and the survey’s diffusion index rose to -7.1 from a -12.9 reading in July. A poll of economists at MarketWatch had expected the index to rise to -5 in August. An index reading below zero indicates that more of the surveyed firms saw a drop in business activity than saw a rise in activity. The August reading is the highest since May.

Labor market conditions came in about flat with July, at -8.6, with the number of firms reporting employment decreases (15%) outnumbering those reporting increase (7%). Firms also reported fewer hours worked in August.

The prices paid index for goods rose from 3.7 to 11.2, while the prices received index rose only slightly, from 1.6 to 2.8. That indicates that costs are rising and firms are not yet confident enough to raise prices to meet the increases. Taking smaller margins means that employment and hours cannot grow, as the labor indexes showed.

The report concludes:

The August Business Outlook Survey suggests that firms in the region’s manufacturing sector are continuing to experience weaker overall activity. More firms reported declines in new orders, shipments, and employment than reported increases. Prices of firms’ manufactured goods were near steady this month, although input prices edged slightly higher. The outlook, while not as optimistic as last month, suggests that firms still believe that activity will increase from current levels over the next six months.

Today’s report is available here.

Paul Ausick

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