Philly Fed factory activity rebounds in August

A worker arranges slabs at IceStone, a manufacturer of recycled glass countertops and surfaces in New York City.

In August, factory activity in the U.S. Mid-Atlantic region unexpectedly increased to the briskest pace since April, and firms reported that input pressure pressures have slowed to the lowest since late 2020.

The Philadelphia Federal Reserve's monthly manufacturing index increased to 6.2 this month from negative 12.3 in July, topping all 30 estimates in a poll of Reuters economists, which had a median prediction for a reading of minus 5.0.

The rebound showed modest growth in the current pace of output and new orders declined for a third month, despite the fact that July's reading had been the lowest since May 2020. Firms on balance remained pessimistic about the near-term outlook.

The report said that the firms expect declines six months from now and that the future indexes of the survey rose slightly but they still suggest that the firms expect declines from now onwards. The 6 month forward index moved up to negative 10.6 from negative 18.6 in July.

The inflation component of the report showed signs of relief from the extreme input price pressures manufacturers have been battling for more than a year. The price paid index hit its highest level since 1979 earlier this year, but the August report showed it tumbling for a fourth straight month to the lowest since December 2020, despite the fact that the index's prices paid index had hit its highest level since 1979.

The prices paid index is down by nearly 50% from April's high, but is roughly twice the level that had prevailed throughout 2019, the year before the COVID-19 epidemic began.