By Xavier Fontdegloria


Activity in the Philadelphia area's manufacturing sector expanded only marginally in May, posting its weakest growth in two years, according to a survey from the Federal Reserve Bank of Philadelphia released Thursday.

The index for current general activity of the Business Outlook Survey fell to 2.6 in May from 17.6 in April, the lowest reading since May 2020 and missing economists' consensus forecast of 15.0 in a poll carried out by The Wall Street Journal.

The Philadelphia Fed survey polls manufacturing firms in the Third Federal Reserve District--which covers eastern Pennsylvania, southern New Jersey and Delaware--every month about the direction of change in business activity. A reading above zero suggest that activity expanded over the month.

In May, 57% of firms polled in the area reported no change in current activity, while the 22% of firms reporting increases narrowly exceeded the 20% reporting decreases, the Philly Fed said.

The survey's results come days after a similar survey carried by the New York Fed signalled manufacturing activity declined in the New York state.

Demand strengthened over the month, according to the survey. The new orders index increased to 22.1 in May from 17.8, and the shipments index climbed to 35.3 from 19.1 the previous month.

The employment index fell sharply to 25.5 from 41.4, a sign that firms in the area continued to add jobs but at a slower pace than in the previous month.

Supply-chain constraints persisted, but didn't worsen. The delivery times index edged down slightly to 17.5 from 17.9, but the unfilled orders index increased to 17.9 from 5.7.

Price pressures remained elevated, but eased somewhat compared with the previous month. The prices paid index declined to 78.9 from 84.6, and the prices received index decreased to 51.7 from 55.0.

Firms were less optimistic about their short-term prospects. The index for future general activity declined to 2.5 in May from 8.2 in April, the lowest reading in more than 13 years. The future new orders increased, while expectations for employment and capital spending declined, the Philly Fed said.


Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com


(END) Dow Jones Newswires

05-19-22 0906ET