A measure of inflationary pressures faced by manufacturers hit its high mark in nearly 43-years this month, according to data released Thursday by the Federal Reserve Bank of Philadelphia.
The Philly Fed’s manufacturing survey showed that its index of prices paid rose four points in April to a score of 84.6 percent, the highest reading since June 1970. More than 85 percent of manufacturers reported increases in input prices.
The index for prices charged for finished goods also moved up from 54.4 to 55.0, with almost 57 percent of manufacturers saying they were paid more for their goods. That was short of the record high hit in the second half of last year.
The high inflationary pressures revealed in the Philly Fed survey, which was conducted between April 11 and April 18, suggest that inflationary pressures have not subsided and inflation may continue to rise in the months ahead. Some economists have said that inflation may have peaked in March, largely because core CPI—which excludes food and energy—declined on a month-to-month basis.
The monthly report covers manufacturing in the Federal Reserve’s Third Federal Reserve District, which includes eastern Pennsylvania, southern New Jersey, and Joe Biden’s home state of Delaware.
The April results fell short of expectations. Factory activity continued to expand but at a softer pace than expected. The index for current general activity fell to 17.6 in April from 27.4 in March, erasing almost all of last month’s gain and missing economists’ expectations of 20.5.
The top indicators of demand weakened over the month, according to the survey. The new orders index declined to 17.8 from 25.8, and the shipments index droppedto 19.1 from 30.2. That may be evidence of demand destruction for ongoing inflation. Wednesday’s Beige Book from the Federal Reserve also indicated some evidence that consumers and businesses were holding back because of high prices.
Manufacturers in the region still expect higher costs across all categories of expenses in 2022. Responses indicate a median expected increase of 10 to 12.5 percent for raw materials and of 7.5 to 10 percent for energy and for intermediate goods, higher than when this question was asked back in January. The median expected change for total compensation—which includes wages plus benefits—was unchanged from January at 5 to 7.5 percent.
There was some inflation relief in the outlook. The indexes for prices paid and prices received six months from both ticked down, indicating a smaller percentage of firms expect their costs and prices of finished goods to rise. Still, however, these remain at historically very high levels, with 73.9 percent of manufacturers saying they expect costs of inputs to increase and 67 percent saying they expect to charge more for their products.
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