Philly Fed: Manufacturing Conditions Looking Up

The Federal Reserve Bank of Philadelphia, which covers New Jersey, Delaware and eastern Pennsylvania, said this week that manufacturing conditions are looking up for the region, according to its monthly Business Outlook Survey.

The Fed's diffusion index, a broad measure of manufacturing conditions, increased from a rating of -5.2 in May to 12.5 this month, the highest reading of activity since April 2011, according to the report.

Thirty-four percent of companies reported increased activity this month versus May, far greater than the 21.5 percent reporting decreased activity, according to the Fed.

In the next six months, more than 45 percent of companies expect activity to increase, compared with just 12 percent expecting a decline. Forty percent said they expect no change.

New orders followed similar trends as the general index, with the indicator jumping from a -7.9 to 16.6. Thirty-eight percent of companies said they've had an increase in new orders.

A clear majority of companies, however, are not changing their workforce numbers; 62 percent said they had no plans to change their workforce, while 20 percent are decreasing their workforce. Fifteen percent are hiring.

To some extent, there are mixed messages in pricing. While most manufacturers (76 percent) reported no change to the prices they're receiving for their goods, 20 percent said they're receiving higher prices than in May. That number is up from just 7 percent.

However, companies are paying more for input costs, too. Twenty-eight percent said they're paying higher prices for materials, with most firms (65 percent) saying prices are unchanged.

When the Fed asked companies to generally describe their production over the next six months, it split nearly evenly with 49.3 percent saying they expect to increase production and 50.7 percent not expecting to add production.

Whether or not they planned to, the largest segment of companies, 36 percent, said they could increase production by adding workers. Increasing work hours followed second at 29 percent and increased productivity third at nearly 19 percent.