By Xavier Fontdegloria
Manufacturing activity in the Philadelphia area grew at a robust pace in May, albeit retreating from the decades-high expansion speed registered the previous month, according to a report released Thursday by the Federal Reserve Bank of Philadelphia.
The index for current general activity decreased to 31.5 in May from 50.2 in April. The reading is below economists' forecasts in a The Wall Street Journal poll, which expected it to come in at 40.5.
The survey polls manufacturers in the Third Federal Reserve District--which covers eastern Pennsylvania, southern New Jersey and Delaware--about the direction of change in overall business activity at their plants on a monthly basis.
The index signals that overall manufacturing activity in the region remained in expansion territory for a year, but the growth pace in May eased somewhat compared with that of April.
In May, 43% of firms reported increases in overall activity, while 12% reported decreases compared with the previous month.
The survey's indicators for general activity, new orders and shipments declined from April's readings but remained elevated, the report said.
The new orders index decreased four points to 32.5, while the shipments index fell four points to 21.0.
Firms reported rising manufacturing employment, but increases were less widespread as the current employment index decreased 12 points to 19.3. Almost 26% of the firms reported higher employment, 6% reported lower employment, and 65% reported no change, the data showed.
Demand for the U.S. manufacturing sector remains strong, but headwinds related to supply and labor shortages are leading to increased prices.
Price indicators reached 40-year highs. The prices paid index increased eight points to 76.8, its highest reading since March 1980 with nearly 77% of the firms reporting increases in input prices while none reported decreases.
The current prices received index increased seven points to 41.0, its highest reading since May 1981, the report said.
The survey's indicators for future general activity moderated this month but continue to indicate that the firms expect growth over the next six months.
The diffusion index for general activity over the next six months decreased 14 points to 52.7 in May after reaching a 20-year high last month. The future new orders index, shipments and employment indexes also fell but remained in expansion territory.
Write to Xavier Fontdegloria at firstname.lastname@example.org
(END) Dow Jones Newswires
May 20, 2021 09:15 ET (13:15 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.