(Reuters) – Manufacturing activity in the U.S. Mid-Atlantic region expanded by the most in two years in April on the strength of new orders and shipments of finished goods, but renewed input cost pressures could reinforce hesitation among Federal Reserve officials to pivot toward interest rate cuts.
The Philadelphia Fed on Thursday said its monthly business conditions index rose to 15.5 from 3.2 in March, exceeding the median estimate among economists in a Reuters poll for a reading of 2.3 and overshooting even the most optimistic forecast among 34 economists surveyed.
The data buffers other recent indications of a recovery underway in a U.S. factory sector that by many measures had endured a modest downturn throughout 2023 even as the wider economy grew above its potential.
The Philly Fed’s index for new orders climbed to its highest since last August and shipments activity was its most brisk since August 2022.
The prices paid index rose to its highest since December while prices received by goods producers saw a slight increase.
Both measures had trended notably lower through the second half of 2023, among the indicators that Fed officials had embraced at that time as a signal that inflation was on track to return to their 2% target. Their increase this month echoes other recent data showing inflation this year is proving to be stubborn, prompting central bankers to back away from providing any guidance on when policy easing might begin.
Factory employment, meanwhile, continued to fall, dropping to its lowest level overall since May 2020, in keeping with other gauges showing sluggish employment in the sector. Manufacturing job growth has been next to non-existent over the past year, with the Labor Department’s measure of new factory jobs averaging just 2,000 a month in that span, among the weakest-performing industries in the private sector.
