Manufacturing in the Philadelphia Federal Reserve district slowed sharply in October. The Manufacturing Business Outlook Survey, released on Thursday with responses collected from 5 to 12 October, put the current general activity index at 20.9, down from 37.8 in September. It is the second consecutive monthly decline. The index is still positive, which means more firms reported growth than contraction.
The bank's own summary was measured. "Responses to the October Manufacturing Business Outlook Survey suggest overall expansion," it said, adding: "The indicators for current activity, new orders, and shipments all moderated but remained positive this month." The number is a large fall. The composition is the story.
Orders collapsed more than activity
The headline fell by 16.9 points, by this publication's arithmetic. New orders fell much further, from 29.2 to 4.3, a drop of nearly 25 points. Shipments eased to 15.3 from 27.7. Unfilled orders went from 20.4 to 2.4, and the delivery times index fell to 8.5 from 26.5.
Employment held up better: 9.1 against 11.8 in September. The average workweek index fell to 7.5 from 18.0, its lowest since June. Inventories remained negative at -12.8, essentially unchanged from -12.5.
New orders are the series that leads the rest. A reading of 4.3 means that only slightly more firms saw orders rise than fall. If it persists, shipments and employment will follow it down. One month does not make that case.
Prices went the other way
The survey's price indicators "continued to indicate overall increases in prices," the bank said. The prices-paid index eased to 43.2 from 48.6, and no firm reported lower prices paid; 52 per cent reported no change. The prices-received index rose to 40.1 from 31.3, the bank said, its highest since May 2025.
By this publication's arithmetic, the gap between prices paid and prices received narrowed from 17.3 points in September to 3.1 in October. That suggests manufacturers are recovering more of their cost increases from customers. It is also consistent with the producer-price release the same morning, in which wholesale prices rose 1.3 per cent in a month. It does not show that they are doing so at the expense of volume, but the fall in new orders is the pattern one would expect if they were. That is inference, and the survey does not ask the question.
Expectations, and the contrast with New York
The six-month outlook is softer. The future general activity index fell to 33.0 from 52.9, the lowest since January. Future new orders dropped to 37.0 from 62.3, and future employment to 30.1 from 50.6. The bank said expectations "continued to suggest expectations for growth over the next six months," although "those expectations were less widespread this month."
The survey is one reading from one district and is a diffusion index, not a measure of output. It sits against the Empire State survey, which on the same day showed New York factories at their best level since December 2021. Regional surveys often disagree in a given month, and neither is a forecast of the national figure.
Capital spending
The bank asked its annual special question about next year's investment. A total of 52.2 per cent of firms expect to spend more in 2027 than in 2026, 47.8 per cent expect the same, and none expect to spend less. A year earlier, 36 per cent expected an increase and 19 per cent a decrease, according to the bank. Spending on noncomputer equipment scored 50.0, software 30.4, structures 26.1 and energy-saving investment 13.6.
Firms say they will spend while orders slow. The test is whether they follow through if November's orders index falls again. The next survey is scheduled for 19 November.
Sources
- Federal Reserve Bank of Philadelphia, Manufacturing Business Outlook Survey, October 2026: https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis/mbos-2026-10
- Federal Reserve Bank of Philadelphia, MBOS landing page (release schedule): https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis/manufacturing-business-outlook-survey
Every index value comes from the Philadelphia Fed's October 2026 Manufacturing Business Outlook Survey, released 15 October 2026 with responses collected 5 to 12 October, as published on the bank's survey page. The 19 November date for the next survey is from the bank's release schedule. The Empire State comparison relies on this publication's earlier story. The spread between prices received and prices paid is this publication's arithmetic. The reading of what the pattern means is ours. The analysis is our own.
Topics businessmanufacturingpricescapital spending
