Philly Fed's District Factory Activity Contracted for Fifth Straight Month in January

By Xavier Fontdegloria

Manufacturing activity in the Philadelphia area weakened in January for a fifth month in a row, highlighting the sector's increasing woes as demand wanes.

The Federal Reserve bank of Philadelphia said Thursday that the index for current general activity of its Business Outlook Survey rose to minus 8.9 in January from minus 13.7 in December. Any reading below zero signals contraction.

Economists polled by The Wall Street Journal expected the index to come in at minus 10.0.

The Philadelphia Fed survey polls manufacturing firms in the Third Federal Reserve District--which covers eastern Pennsylvania, southern New Jersey and Delaware--about the direction of change in business activity.

The index has been in negative territory since September, suggesting conditions in the region's factory sector are weakening. However, January's data suggest activity declined at a softer pace compared with December.

In January, 33% of the firms polled said conditions worsened, more than the 24% which said activity increased.

Demand continued to decline, but less so than in the previous month. The new orders index rose in January to minus 10.9 from minus 22.3 in December, and the shipments index increased to 11.1 from minus 0.9.

The employment index rose to 10.9 from minus 0.9, pointing to gains in employment over the month. However, the majority of responding firms reported steady employment levels.

Both unfilled orders and delivery times indexes remained in negative territory, suggesting falling order backlogs and quicker vendor lead times.

The survey pointed to mixed price pressures. The prices paid index fell to 24.5 from 36.3, the lowest reading since August 2020, pointing to easing prices for inputs. However, the prices received index rose slightly to 29.9 from 28.1.

The survey's future indexes signaled tempered expectations for growth over the next six months, with the index for future general activity rising to 4.9 in January from minus 0.9 a month earlier.

Write to Xavier Fontdegloria at [e-mail]

(END) Dow Jones Newswires

01-19-23 0912ET