A report released by the Federal Reserve Bank of Philadelphia on Thursday showed regional manufacturing activity unexpectedly contracted at a faster rate in the month of November.
The Philly Fed said its diffusion index for current activity tumbled to a negative 19.4 in November from a negative 8.7 in October, with a negative reading indicating a contraction in regional manufacturing activity.
The decrease by the Philly Fed index came as a surprise to economists, who had expected the index to inch up to a negative 6.2.
With the unexpected slump, the index dropped to its lowest level since hitting a negative 43.1 in May 2020.
“Manufacturing conditions in the U.S. are deteriorating because of the weakening in the global economy and appreciation in the U.S. dollar,” said Gurleen Chadha, U.S. Economist at Oxford Economics.
The unexpected decline by the headline index partly reflected a continued contraction in new orders, as the new orders index edged down to a negative 16.2 in November from a negative 15.9 in October.
The report also showed a notable slowdown in the pace of job growth, with the number of employees index plunging to 7.1 in November from 28.5 in October.
The shipments index also slipped to 7.0 in November from 8.6 in October, indicating a modest slowdown in the pace of shipment growth.
The prices paid index also edged down to 35.3 in November from 36.3 in October, while the prices received index jumped to 34.6 from 30.8.
Looking ahead, the Philly Fed said the survey’s future indexes rose slightly but continued to suggest firms expect overall declines in activity and new orders six months from now.
While the diffusion index for future general activity climbed to a negative 7.1 in November from a negative 14.9 in October, the reading remained negative for the sixth consecutive month.
“Slower manufacturing growth shouldn’t come as a surprise as a dwindling pipeline, downbeat sentiment, rising interest rates, and lingering supply chain challenges will weigh on regional, and national, factory activity,” said Chadha.
Meanwhile, the New York Fed released a separate report on Tuesday showing a notable rebound in regional manufacturing activity in the month of November.
The New York Fed said its general business conditions index surged to a positive 4.5 in November from a negative 9.1 in October. Economists had expected the index to jump to a positive 5.0.
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