The manufacturing landscape in the Mid-Atlantic region witnessed a notable resurgence this month, with the Federal Reserve Bank of Philadelphia reporting an unexpected rebound in activity. The impetus for this rebound was primarily driven by an increase in employment levels, which effectively mitigated the declines seen in both orders and shipments.
This is substantiated by the latest Manufacturing Business Outlook Survey, which indicated a positive shift in the headline gauge for business activity, rising from a concerning minus 7 in August to a modest 1.7 in September. In a detailed analysis of the data collected between September 9 and 16, it was revealed that nearly 22% of manufacturing firms reported an increase in general activity.
Conversely, 20% indicated a downturn, while a substantial 51% noted no change at all. This reveals a nuanced picture of the manufacturing sector, which the Federal Reserve branch characterized as mixed overall. A significant highlight of the survey was the employment gauge, which regained momentum, climbing to 10.7 in September from minus 5.7 just a month prior.
This represents the second positive assessment within the last three months, breaking a sequence of predominantly negative readings dating back to March 2023. Notably, approximately 89% of firms reported stable employment levels, marking the highest proportion of steady employment since December 1978.
Furthermore, 11% of surveyed firms reported job gains, a promising sign amid a fluctuating economic backdrop. However, not everything is moving in an upward direction, as the metric tracking new orders fell into negative territory, registering at minus 1.5 in September, a stark contrast to the previous month’s figure of 14.6.
Meanwhile, shipments experienced a significant downturn, plummeting nearly 23 points to minus 14.3, which is the lowest reading observed since March 2023. These decreases raise questions about the sustainability of the current manufacturing rebound. Adding to the complexity, firms continued to report an upward trend in overall prices, according to the Federal Reserve's report.
The prices paid index surged by 10 points, reaching 34 in September, its highest level since December 2022. Approximately 34% of firms indicated they were facing higher input prices, while none noted a reduction. Likewise, selling prices rose to 24.6 from a previous reading of 13.7, suggesting that cost pressures remain a critical issue for manufacturers. Looking ahead, both raw material and selling prices are projected to rise over the next six months, as indicated by the survey findings.
Expectations for general activity also saw a slight uptick, increasing to 15.8 in September, up from August’s reading of 15.4. Moreover, the future component for new orders more than doubled, reaching 21.8, while shipments saw an advance of 17 points. The forward-looking employee index rose to 19.1, a positive shift from 7.4, indicating that manufacturers are cautiously optimistic about employment prospects. In conclusion, while the Mid-Atlantic manufacturing sector has displayed signs of recovery thanks to employment gains, challenges remain, particularly in orders and shipments which could influence future growth trajectories..