Philadelphia Fed Regional Survey Shows Growth

The Federal Reserve Bank of Philadelphia said Thursday that its index of regional business activity rose in August but that it included some signs that manufacturing growth was occurring at a slower pace.

The Philadelphia Fed’s diffusion index for overall business activity for the month rose to 13.9 in August, up from 11.3 the previous month.

But a slip in new orders and measures showing no employment increases indicate that the growth might be less robust than in previous months, the bank said.

The survey also showed that the percentage of firms reporting having paid higher prices for supplies in August rose sharply to its highest level in more than five years.

More than a quarter of the companies surveyed said they had raised prices on goods they manufactured. Only 3% said they had lowered prices.

In their forecasts for the next six months, two-thirds of the manufacturers surveyed said they expect to pay more for their raw materials. Almost half said they expect to raise prices on their own manufactured goods.

Merrill Lynch economist Bill Kan called the rise in price components troubling, adding that the trend could show up in the government’s consumer price index in coming months.

Richard Hoey, chief economist with Dreyfus Corp., said the increase in the regional price index supports the position of policy-makers worried about inflation and, to a lesser extent, the Federal Reserve Board’s recent rate increases. (The Fed raised interest rates this week for the fifth time this year.)

“It’s another leading indicator of the price momentum in the system and is part of a broader pattern we should all be paying attention to,” agreed economist H. Erich Heinemann of Ladenburg Thalmann.