Philadelphia Fed’s Manufacturing Business Outlook Survey Contracts for Second Straight Month

The Philadelphia Federal Reserve said the Manufacturing Business Outlook Survey showed continued contraction in the mid-atlantic region in October. The reading came in well below Wall Street’s expectation for a rise to -1, and labor market indicators continued to weaken.

Readings above 0 point to expansion, while those below indicate contraction.

The indicator for general activity remained negative, while the new orders and shipments indexes turned negative this month. The diffusion index for current activity remained in contraction for the second consecutive month, although it edged slightly higher from -6.0 in September to -4.5. The indexes for current new orders and shipments showed “notable deterioration this month,” according to the Philadelphia Fed, as both indexes fell below zero and marked the first negative reading for the new orders index since May 2013.

Indicators for delivery times and unfilled orders were in negative territory, as well, with 30% of the firms reported a decline in inventories during the month of October and the current inventories index fell by 15 points.

The survey’s indicators for labor market conditions suggest slightly weaker employment. While the percentage of firms reporting declines in employment (15%) was slightly greater than the percentage reporting increases (13%), the employment index tanked nearly 12 points, down from 10.2 to -1.7. Firms also reported overall declines in average work hours in October, and the workweek index was negative for the first time since May.

The Philadelphia Federal Reserve released the report soon after the New York Federal Reserve’s Empire State Manufacturing Survey for the region showed the sector in the region stuck in contraction territory, declining for a third consecutive month. The gauge of manufacturing activity in the region clocked in at -11.36, up from -14.67 in September.