Philly Fed: Inflation Getting Worse Even While Demand Slumps Again

Philadelphia, Pennsylvania, USA skyline over Center City at sunset.
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Factory activity in the Philadelphia area declined for the second consecutive month in October even while inflationary pressures were more widespread, the Federal Reserve Bank of Philadelphia said Thursday.

The indexes for current general activity and new orders both remained negative for the month and the shipments index remains low but still in positive territory. Despite sagging demand, the measures of inflation worsened and demand for labor increased, suggesting a stagflationary environment.

The measure of general business activity improved by 1.2 points to minus 8.7. Economists had forecast a stronger improvement to minus five from last month’s minus 9.9. The index has been negative in four out of the last five months, with a positive reading only in August.

The outlook for business conditions six months from now dropped to minus 14.9 from minus 3.9.

The new orders index, a key measure of demand for manufactured goods, improved slightly from minus 17.6 in September to minus 15.9. The share saying orders have fallen was 32.3. Those saying orders had increased made up 16.4 percent of respondents. The outlook, however, grew much dimmer, dropping into negative territory at minus 16.7 from last month’s positive six, with 42.5 percent expecting orders to fall.

The gauge of prices charged by manufacturers for finished products climbed from 29.6 to 30.8, as 40.7 percent said they had increased prices and just 9.9 percent said they had lowered prices. The other price measure, which looks at what manufacturers paid for components and materials, jumped to 36.3 from 29.8, with 45.9 percent saying their costs had increased and just 9.6 percent saying costs had declined.

The index for number of employees rose to 28.5 from 12, reflecting more employees at 29.1 percent of manufacturers and fewer at just 0.6 percent. The measure of average workweek turned positive, going from minus 3.8 to 10.4.


The outlook for employment and prices, however, indicated that on balance both are still expected to rise. Nonetheless, these eased somewhat from last month.

The Philadelphia Fed survey covers manufacturing firms in the Third Federal Reserve District–which covers eastern Pennsylvania, southern New Jersey and Delaware.


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