Philadelphia Fed manufacturers put their six month outlook at its highest reading since August 1983, and their current order book went the other way

The firms answering this survey are not describing the same economy in its two halves.

Asked about now, the region's manufacturers produced a current general activity index of 47.4 in August, up from 41.4 in July and the highest the bank has recorded since April 2021. Underneath that, the two indexes that carry the actual work both fell. New orders dropped 7 points to 30.1. Shipments fell from 33.7 to 27.7. Both remain above their long-run averages excluding recessions, so this is a slowing of the rate of increase rather than a contraction.

Asked about the next six months, the same firms produced a future general activity index of 73.6, up 39 points in one month, which the Federal Reserve Bank of Philadelphia says is its highest reading since August 1983. Almost 75 percent of them expect activity to increase, against 52 percent in July. One percent expect a decrease, against 17 percent.

The spending plans

The index for future capital expenditures rose 18 points to 48.2. The bank describes that as the highest in 53 years.

That is the number worth holding on to, and it deserves the caveat the survey structure imposes. A diffusion index counts the share of firms reporting an increase minus the share reporting a decrease. It measures breadth, not amount. A reading of 48.2 says a great many firms in one Federal Reserve district intend to spend more on plant and equipment than they did. It does not say how much, and an intention recorded in August is not an order placed in September.

Future new orders rose 31 points to 66.0 and future shipments rose 24 points to 63.5, each the highest in more than five years. Future employment rose 6 points to 35.4, after four consecutive monthly declines.

Hiring now, not only later

The current employment index rose 18 points to 27.9, its own highest since April 2022. The composition matters more than the number: nearly 33 percent of firms reported employment increases, against 13 percent last month, while the share reporting no change fell from 83 percent to 62 percent, which the bank calls the lowest in two years. The average workweek index went from 14.0 to 26.5.

Prices fell, and the firms expect that to reverse

Both current price indexes came down to their lowest readings since February. Prices paid fell 13 points to 40.9, with 41 percent of firms reporting higher input costs against 54 percent last month and not one firm reporting a decrease. Prices received fell 10 points to 17.7.

The forward-looking pair went up. Future prices paid rose 6 points to 62.9 and future prices received rose 18 points to 59.8.

The special questions this month asked about cost pressure directly. Nearly 38 percent of the firms said their customers have become more price sensitive since last quarter, and 58 percent said sensitivity was about the same. Almost 44 percent said they anticipate changes in their industry's costs in the near term, down from 48 percent a quarter ago. Of those, 80 percent expect their competitors to raise prices in response, and the median expectation was that the competitors would move within four months.

Responses were collected between 10 and 17 August. The next release is on 17 September.