» » Philly Fed Index Indicates Substantial Contraction In October

Philly Fed Index Indicates Substantial Contraction In October

(RTTNews) – Thursday morning, the Federal Reserve Bank of Philadelphia released its report on manufacturing activity in the mid-Atlantic region in the month of October, showing that activity contracted at a much faster than expected pace.

The report showed that the index of current activity fell to a negative 37.5 in October from a positive 3.8 in September, with a negative reading indicating a contraction in the sector. Economists had been expecting the index to show a reading of negative 5.0.

The decrease marked the index’s largest one-month decline ever, dragging it to its lowest level since October of 1990. The Philly Fed noted that the weakness came amid the turmoil that has been seen in the financial markets over the past few weeks.

The Philly Fed said that the special questions portion of its survey revealed that nearly 14 percent of firms had experienced problems obtaining credit to finance ongoing activities. Additionally, 30 percent of firms indicated that their customers were having such problems.

A substantial contraction in new orders contributed to the weakness in the sector, with the new orders index falling to a negative 30.5 in October from a positive 5.6 in September. Additionally, the shipments index fell to a negative 18.8 from a positive 2.6.

The report also showed a notable acceleration in the pace of contraction in employment, as the number of employees index fell to a negative 18.0 in October from a negative 0.9 in the previous month.

At the same time, the Philly Fed said that price pressures eased notably in the month, with the prices paid index falling to 7.2 in October from 31.5 in September and the prices received index dropping to 5.3 from 15.5.

Manufacturers’ expectations for future conditions also deteriorated sharply in October, as the future general activity index plunged to 4.2 from 30.8 in the previous month. The indexes for future new orders and shipments both fell sharply.

On Wednesday, the New York Fed released its report on business activity in the New York manufacturing sector in the month of October, which also showed a significant deterioration in business conditions.

The report showed that the general business conditions index fell to a record low of negative 24.6 in October from a negative 7.4 in September, with a negative reading indicating a contraction in the sector. Economists had expected the index to come in at a negative 10.0.

A steep drop in new orders contributed to the acceleration in the pace of contraction, with the new orders index falling to a record low of negative 20.5 in October from a positive 4.4 in September. Shipments also turned lower after seeing some growth in the previous month.

While the report showed a modest slowdown in the pace of contraction in employment, with the number of employees index coming in at a negative 3.7 in October compared to a negative 4.6 in September, the index remained negative for the fourth consecutive.

At the same time, the New York Fed said that the pace of price growth eased significantly. The prices paid index fell to 31.7 in October from 44.8 in September, while the prices received index fell to 20.7 from 24.1 in the previous month.

Looking ahead, the report showed that the future general business conditions index fell to 24.2 in October from 43.1 in September. The futures new orders index and the future shipments index both showed notable declines.

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