The March Philly Fed data indicates a headline figure of +12.5, better than the expected +8.5, although down from +18.1 previously. Key components include a six-month index at 5.6, a drop from 27.8 last month, and a capex index of 13.4 compared to 14.0 the prior month.
Employment surged to 19.7 from 5.3, while new orders fell to 8.7 from 21.9. Shipments also decreased to 2.0 from 26.3. The average workweek rose to 8.7 from 2.9, but other indicators showed declines, such as unfilled orders at 0.6 versus 1.4 last month.
Manufacturing Activity Trends
Overall, manufacturing activity saw less broad expansion, with positive indicators for general activity, new orders, and shipments, but tighter growth expectations for the next six months were noted. Both price indicators remain high, reflecting ongoing inflationary pressures.
Manufacturing data from the Philadelphia Fed suggests an economy that remains on a growth path, but with mixed signals across different areas. While the headline number exceeded estimates, the sharp decline in the six-month outlook reveals weakening confidence among manufacturers. A shift of this magnitude reflects uncertainty, possibly due to cost pressures or concerns about future demand.
Employment rising substantially indicates firms are still hiring despite signs of deceleration elsewhere. A jump of that size suggests businesses may be catching up on previous labour shortages rather than expanding aggressively. On the other hand, new orders and shipments falling implies demand may be softening, which could affect output if the trend persists. An increase in the average workweek might indicate businesses are maximising their existing workforce before committing to further hiring, especially if order volumes fluctuate.
With unfilled orders barely changing, backlogs do not appear to be building up at a pace that would support sustained production increases. Manufacturers do not seem to be overwhelming their capacity, which aligns with more moderate growth expectations for the months ahead. A modest downtick in capital expenditure plans adds to this picture—firms are still willing to invest, though perhaps with more caution as they evaluate whether demand will justify additional spending.
Pricing And Inflation Pressures
One area that remains difficult is pricing, with both input and output costs staying high. Persistent inflation in this sector suggests that businesses continue to face elevated costs, which may either shrink margins or be passed on to buyers. If firms struggle to absorb these pressures, pricing decisions could affect competitiveness. The months ahead will likely determine whether cost stability improves or whether businesses face further financial strain.
For those operating in this environment, the mix of expansion and caution creates a situation where short-term data points carry more weight. Price pressures, employment strength, and order volume shifts are all variables that demand close monitoring, particularly since expectations for future output have moderated. The way companies navigate margin pressures and labour trends could set the tone for broader economic movements in the coming months.
