Philly Fed Survey Flags Manufacturing Slump as Jobs and Orders Weaken

Prices Remain Elevated Despite Some Easing

While input cost pressures softened, they remain substantial. The prices paid index fell 18 points to 41.4, but none of the firms reported cost declines. On the revenue side, the prices received index dropped to 29.5, indicating a modest decline in pricing power. Nonetheless, the broad direction remains inflationary, which traders should consider in sector allocation.

Production Falls in Q2; Utilization Flatlines

Special survey responses revealed more contraction in activity. Some 41% of firms reported lower production for Q2 versus Q1, against 33% seeing increases. Capacity utilization remains centered in the 70–80% range, unchanged from a year ago. However, uncertainty was a binding constraint for 74% of respondents, and 56% cited labor supply issues as a drag on operations.

Forward-Looking Indicators Lose Ground

Expectations for the next six months weakened across most categories. The future general activity index dropped 29 points to 18.3, while future new orders and shipments fell sharply. Capital expenditure plans also contracted to 14.5. One-third of firms expect worsening uncertainty in the next quarter, and over a quarter anticipate deteriorating supply chain conditions.

Market Forecast: Bearish for Industrial Exposure

June’s survey confirms a bearish short-term outlook for regional manufacturing. Soft orders, deepening labor weakness, and falling business sentiment suggest continued underperformance for industrial stocks and related ETFs. Traders should favor defensive plays until clearer signs of recovery emerge.