Philly Fed: Manufacturing activity declined moderately
Manufacturing activity declined somewhat over the past month, with companies reporting decreases in overall activity, new orders and employment, according to the Federal Reserve Bank of Philadelphia.
The Fed’s diffusion index — a broad measure of economic activity in manufacturing — was -5.8 this month, compared with a reading of 4.6 in December, which indicates a slowdown in activity.
New orders also slipped into the negatives with a reading of -4.3, down from 4.9, according to the Fed. The shipments index remained positive but indicated no growth, the Fed said.
The labor market also deteriorated at companies in the past month. The percent of firms reporting employment decreases was 16 percent, exceeding the 11 percent reporting employment gains, according to the Fed.
By far, the two most important factors for companies in restraining their hiring were keeping operating costs low and expected slow growth in sales, according to the Fed. More than 40 percent of respondents ranked those two items in their top-three concerns over the past month with regard to hiring, with most companies putting low operating costs and sales growth as the top concern.
More than 30 percent of respondents ranked the uncertainty of health insurance costs in their top-three reasons for restrained hiring, but few companies ranked it as their top concern, according to the Fed.
Slightly more than 49 percent of respondents said federal fiscal policy developments in the past month had no affect on their hiring plans, while 37 percent said they decreased company plans to hire, according to the Fed.
Over the next six months, about 43 percent of companies expect an increase in general business activity, an improvement from the previous month’s reading, according to the Fed. Companies also expected shipments and new orders to improve. But just 22 percent expect employment to increase in that time.
“The survey’s future indicators suggest that firms expect recent declines to be temporary,” the Fed wrote in the report.
The Fed serves eastern Pennsylvania, including the midstate, southern New Jersey and all of Delaware.