The numbers: The Philadelphia Federal Reserve’s business activity index fell slightly to 19.4 in August from 21.9 in the prior month, marking the fourth consecutive monthly decline since the index hit a roughly 50-year high in April, the regional bank said Thursday.
Economists polled by the Wall Street Journal expected a 22 reading. Any reading above zero indicates expansion in the manufacturing sector.
What happened: The gauge of new orders increased 6 points to 22.8 from last month, while the shipments index fell 6 points to 18.9.
Unfilled orders fell to 7 from 19 in July.
The reading of the six-month business outlook fell to 33.7 from July’s reading of 48.6.
The index of the number of employees rose to 32.6 from 29.2 last month, the regional bank said.
The prices-paid index edged higher to 71.2 from July’s reading of 69.7 , while the prices-received index added 7 points to 53.9 in August, the highest reading since May of 1974.
Big Picture: Factory activity in the region continued to show solid growth, but rising prices continued to weigh on the outlook for the manufacturing sector. Firms reported that they expected to be able to pass on price increases to their customers and the decrease in unfilled orders suggested some easing of supply constraints.
The numbers echo a report from the New York Fed showing regional manufacturing activity growth also slowing from a record high in July.
What economists are saying: “The takeaway here should be that, pandemic-related volatility aside, the level of this index remains quite solid (and above where it was running pre-pandemic in 2019), which is consistent with other evidence concerning the manufacturing sector,” wrote Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez, Inc. “Prices paid and supplier deliveries readings point to ongoing problems with supply chains (including labor availability) and continued upward pressure on the price of many inputs.”
Market reaction: Stock index futures
were headed lower before the start of trade Thursday as investors parsed minutes from the latest Fed meeting that suggested tapering of central bank’s bond-buying program would begin later this year.