Philly Fed Survey Reveals Record-Breaking Trends In Manufacturing Sector

After a year of dire economic news and gloomy predictions, the March 2021 Manufacturing Business Outlook Survey from the Federal Reserve Bank of Philadelphia has provided a break in the clouds. The report surveyed industry leaders in the Northeast manufacturing sector between March 8-15 and found positivity abounding.

Most notably, the survey found that the index for current manufacturing activity topped a record set nearly 50 years ago, skyrocketing from 23.1 in February to 51.8 this month. On top of that, the new orders index rose to a 50-year high of 50.9, blowing past February’s anemic 22.9. Leading the report was also news that almost 59 percent of the firms surveyed reported increases in current activity, as opposed to 24 percent last month.

This is all despite increasing price pressure. According to the survey, the prices paid index soared to 75.9, which is at its highest level since 1980. Seventy-seven percent of regional firms said they were dealing with higher input prices this month; however, 35 percent also said they were getting higher prices for their own goods.

Job Shortage

After a year that saw staggering unemployment figures in the U.S., the Fed’s March report had even more surprising news.

Over 64 percent of the firms surveyed said they are facing labor shortages, while 45 percent revealed that they have positions they haven’t been able to fill for over three months. On top of that, 29 percent reported that they’re seeing a hefty deficit in qualified applicants for some positions and skills. This has all led to over 42 percent of firms saying that they’ve hired fewer qualified workers to fill some positions.

While that’s not great news for industry employers, it could be a positive development for those looking for jobs. According to the survey, 53.6 percent of firms have increased wages and 21.4 percent have increased recruitment incentives. It also reported that 51 percent of firms expect to increase employment over the next six months, with only 4 percent saying they plan to decrease their labor pools.

Future Looks Bright

The firms responding to the survey remain optimistic about the future of their industry. Almost 70 percent say that they expect to see increases in activity over the next six months, whereas only 55 percent felt that way in February. Only 8 percent expected declines.

The positive report is part of a broader upturn for the manufacturing sector that began thriving in the second half of 2020, but one that some analysts believe may start cooling by the summer.

“Manufacturing sector prospects for 2021 are upbeat, with solid consumer goods demand, inventory restocking, gradual business reopenings and additional federal pandemic relief all set to keep activity on a firm footing,” said Oren Klachkin of Oxford Economics after the release of positive news last month by The Institute for Supply Management. “We expect manufacturing momentum to start cooling around mid-year as vaccine distribution unlocks badly-damaged services activities while concurrently quelling consumer goods demand.”