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The following is the text of the Philadelphia area manufacturing activity from the Federal Reserve Bank of Philadelphia.


Manufacturing firms responding to the April Business Outlook Survey indicated that regional manufacturing activity ex-panded modestly this month. The survey’s broad indicators for general activity, new orders, and shipments all remained posi-tive but fell slightly from their readings last month. The indicator for current employment, however, showed a notable improvement. Price pressures were only slightly more widespread this month. The survey’s broad indicators of future activity remained at relatively high readings, and firms were more optimistic about their plans for hiring over the next six months.

Indicators Suggest Modest Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged down from a reading of 12.5 in March to 8.5 (see Chart 1). Indexes for new orders and shipments remained positive but were slightly weaker than their March readings. The indexes for new orders and shipments, which decreased about 1 point, remain at relatively low readings. The indexes for current unfilled orders increased 14 points and returned to positive territory this month, suggesting a backlog of unfilled orders. Inventories were also reported on the rise this month, with the inventory index increasing 7 points.

Firms’ responses suggested a notable pickup in levels of employment this month. The current employment index, which has been positive for eight consecutive months, increased 11 points, to its highest reading in 11 months (see Chart 2). Twenty-seven percent of the firms reported an increase in employment; 9 percent reported declines. The average workweek was near steady this month, with 75 percent of the firms surveyed reporting no change in average hours.

Upward Price Pressures Still Evident

Indexes for prices paid and prices received both increased, suggesting that price pressures are only slightly more widespread compared to March. Twenty-seven percent of the firms reported higher prices for inputs this month, compared with 25 percent last month. The prices paid index edged 4 points higher. Firms also reported a rise in prices for their own manufactured goods: More firms reported price increases (17 percent) than reported decreases (8 percent). The prices received index, however, increased just 1 point.

Firms’ Outlook Still Optimistic

The future general activity index increased modestly, from a relatively high reading of 32.9 in March to 33.8 this month (see Chart 1). The indexes for future new orders and shipments remained within 1 point of their previous month’s readings. The future employment index showed notable improvement this month, increasing 6 points and reaching its highest reading in 12 months (see Chart 2). The percentage of firms expecting to increase employment over the next six months (35 percent) was significantly greater than those expecting to decrease employment (7 percent).

Summary The April Business Outlook Survey suggests that the region’s manufacturing sector grew modestly this month. All of the broad indicators remained positive, but a greater share of firms reported adding to their payrolls this month. Higher prices for inputs and firms’ own manufactured goods were only slightly more widespread this month. The overall outlook among the reporting firms remains optimistic, with firms’ future employment plans showing notable improvement this month.

Notes: (1) Items may not add to 100 percent because of omission by respondents. (2) All data are seasonally adjusted. (3) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (4) Survey data reflect information received through April 17, 2012.

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