U.S. Data Pulse: Philadelphia Manufacturing Loses Momentum

Research evidence excerpt

U.S. Data Pulse: Philadelphia Manufacturing Loses Momentum

UpdateM

Philadelphia Manufacturing Activity Softens in May

Manufacturing activity was soft in May, according to the Federal Reserve Bank of

Philadelphia’s Manufacturing Business Outlook Survey. The headline general business

activity diffusion index fell 27.1 points to -0.4 in May, well below its 6-month average of

10.9.

Demand and production slowed. The shipments index declined 29.1 points to 4.9, after an

11.8-point rise in the prior month, though it remained in expansionary territory. Meanwhile,

the new orders index decreased 34.7 points to -1.7, pointing to weakened demand. The

shipments index marked a sixth consecutive month of growth, while the new order index

broke a five-month growth streak.

Labor demand from manufacturers remained weak. The employment index rose to -2.8

from -5.1, but remained in contractionary territory, while the average workweek index fell

to 1.2 from 7.7.

Supply chain & inventories: delivery times shortened substantially. The delivery time

index moved down to -10.4 from 1.7, meaningfully lower than its averages of 5.4 and 1.2 in

1Q26 and 4Q25. Inventories increased, with the index rising 8.5 points to 6.6. The sharp

decline in delivery times suggests easing supply chain pressures or slowing demand.

Prices pressures eased yet remained elevated. Both indices were meaningfully higher than

where they were two years ago. The price paid index decreased to 47.9, 11.4 points lower

than in April, yet still reflecting pressure from higher energy prices. The prices received

index fell to 26.3 from 33.5. Elevated prices received suggests that manufacturers are

passing higher input costs on to customers.

Overall, this is the first hint of softness we have seen in manufacturing surveys this year.