Manufacturing activity in the Mid-Atlantic region of the country expanded at a faster pace this month, according to new data from the Federal Reserve Bank of Philadelphia (FRBP). Specifically, the general business conditions index rose from 19.9 to 25.7 in July, a larger than expected rebound from June’s sharp decline. Under the hood, new orders and inventories improved this month, while measures of shipments, employment, and hours worked deteriorated.
Forward-looking (6-months ahead) activity gauges were much weaker in July, including a marked drop in capital expenditure plans. Although U.S. trade policy remains a potential headwind, managers for now appear more worried about inflation. Indeed, prices paid continue to rise faster than prices received, putting additional strain on margins as passing on higher input costs to customers becomes more difficult. The report’s authors added that “Price increases for purchased inputs were reported by 63 percent of the manufacturers this month, up from 54 percent last month. … More than 60 percent of the firms expect price increases for purchased inputs over the next six months. Over 52 percent expect higher prices for their own manufactured goods.”
Sources: Econoday, FRBP, ZH, Bloomberg, FRBSLPost author: Charles Couch