Philly Fed Stands Firm in May, Sort Of

The Federal Reserve Bank of Philadelphia’s top economic report is the Philly Fed Manufacturing report, but this Fed branch also releases data on non-manufacturing firms. Respondents to the May Nonmanufacturing Business Outlook Survey continued to report moderate growth in current activity at their firms.

Tuesday’s report showed that the diffusion index for current activity was little changed from the month of April at 18.2. One issue that did stand out was that responding firms reported a lower level of optimism about future activity, both at the firm level and at the regional level, for the next six months versus the previous survey outlook given in April.

Basic trends were as follows: general activity at the firm level held steady, the sales and new orders indexes rose, labor market conditions remained steady, firms reported increases in input prices and capital expenditures more or less held steady.

Individual notes were issued as follows:

• The share of firms reporting no change rose nearly 9 points to 47 percent in May, while the share of firms reporting increases (34 percent) exceeded the share of firms reporting decreases (16 percent).
• The general activity index for the region fell from 13.5 in April to 4.6 in May. Twenty-one percent of the firms reported an increase in regional activity this month, while 59 percent reported no change.

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The new orders and sales/revenues indexes rose this month:

• The new orders index rose by 9 points to 23.1.
• Thirty-seven percent of the firms reported increases in new orders, compared with 14 percent of the firms that reported decreases.
• The sales/revenues index experienced a sharper increase of 14 points up to 23.6.
• Forty-three percent of the respondents reported increases in sales this month, up from 32 percent last month.

Survey results suggest a relatively steady labor market and prices paid for goods and services rose while prices received ticked down. These were shown as follows:

• The full-time employment index rose by 3 points to 10.6, and it has remained near its current value since the start of this year.
• The part-time employment index edged up slightly to 11.2.
• The workweek index decreased 6 points to 19.3.
• The wages and benefit costs index fell by some 14 points down to 26.6.
• The index for prices paid increased from 10.9 in April to 22.4 in May, indicating that firms experienced higher input costs.
• A larger share of firms reported increases in input prices this month (28 percent) compared with last month (20 percent), and a smaller share reported decreases in input prices this month (5 percent) compared with last month (9 percent).
• The prices received index fell by 8 points down to a level to 5.5.
• The share of firms reporting no change in prices received rose from 57 percent last month to 64 percent this month.