Philly Manufacturing Activity Grows without signs of recession
2023.01.19 13:00
Philly Manufacturing Activity Grows without signs of recession
By Tiffany Smith
Budrigannews.com – Although another reading suggesting a decline in activity did little to quell fears of a looming recession that swept through financial markets on Wednesday, a key gauge of U.S. manufacturing activity improved in January.
From a downwardly revised level of -13.7 in December, the Philadelphia Federal Reserve’s rose modestly for a second month in a row to -8.9 in January. Even though the index level is still low by historical standards, it stands in stark contrast to the New York Fed’s earlier this week announcement of a plunge in the comparable.
At the end of last year, the numbers revealed a picture of weakening activity across the United States. The Philly Fed index is generally regarded as the more accurate reflection of manufacturing trends nationwide. Financial markets plummeted on Wednesday after December data for and had both significantly underperformed expectations.
According to the authors’ summary, “The indicators for and improved from their December readings but remained negative.” Additionally, the survey suggested that businesses have only “tempered expectations for growth over the next six months.”
On Thursday, data for December dropped to their lowest levels since the middle of 2020, providing further evidence of the economy’s slowdown. Nancy Vanden Houten, an analyst with Oxford Economics, made the observation that the larger-than-anticipated decline in building permits, particularly for single-family dwellings, suggested that housing activity would continue to be weak throughout the first quarter.
She argued, however, that after a 22% decline last year, the worst of the decline in housing construction is probably over.
Despite expectations for an increase, the labor market remained a bright spot, falling to a new nine-month low of 190,000, defying expectations. The numbers reinforced perceptions that the slowdown may not be as severe as would otherwise be the case and that the ever-increasing number of people who are losing their jobs across the country are still having no trouble finding new employment.
Even though the signs of a slowdown in the fourth quarter have become impossible to ignore, KPMG chief economist Diane Swonk stated that the strength of the labor market still makes it difficult to stop raising interest rates.
Swonk stated that the Fed was still more likely to “go further” than to “stop short,” which she claimed the financial markets found difficult to accept.
Shortly after the data were released, Boston Fed President Susan Collins gave a speech to a conference in which she said that labor costs are still rising too quickly to be comfortable and that the Fed probably needed to raise the fed funds rate “just above 5%” and then keep it there “for some time.” Her comments were backed up by the data.
