Manufacturing activity in the Philadelphia Federal Reserve’s district slowed sharply in October as new orders weakened, although firms continued to report overall expansion and a growing share raised their selling prices. The Federal Reserve Bank of Philadelphia’s October survey, released Thursday, October 15, showed its general business activity index falling to 20.9 from 37.8 in September. The 16.9-point decline marked the index’s second consecutive monthly drop.
The deterioration was more pronounced in incoming demand. The new orders index plunged from 29.2 to 4.3, a 24.9-point decline, while the shipments index decreased from 27.7 to 15.3. All three measures remained above zero, indicating that more manufacturers reported increases than decreases. However, the narrowing readings pointed to a substantially less widespread expansion than in September.
New Orders Lose Momentum
The weakening in new orders was the most significant development beneath the headline activity figure. According to the survey’s seasonally adjusted responses, 38.5% of manufacturers reported an increase in new orders, compared with 44.2% in September. Meanwhile, the share reporting declining orders jumped from 15.0% to 34.1%.
That shift reduced the new orders diffusion index to just 4.3, leaving the measure marginally above the threshold separating a net increase from a net decrease among respondents. The general activity index showed a similar, though less severe, moderation. Approximately 41.2% of firms reported higher activity, while 20.3% reported declines. In September, those shares were 45.3% and 7.5%, respectively.
Philadelphia Fed Manufacturing Indexes
September vs. October 2026 · Seasonally adjusted diffusion indexes
| Manufacturing Indicator | September 2026 | October 2026 | Change (Points) |
|---|---|---|---|
| General activity | 37.8 | 20.9 | −16.9 |
| New orders | 29.2 | 4.3 | −24.9 |
| Shipments | 27.7 | 15.3 | −12.4 |
| Employment | 11.8 | 9.1 | −2.7 |
| Prices received | 31.3 | 40.1 | +8.8 |
Source: Federal Reserve Bank of Philadelphia, October 2026 Manufacturing Business Outlook Survey . Seasonally adjusted diffusion indexes; changes are measured in index points, not percentages.
The shipments index also weakened by 12.4 points to 15.3, suggesting that production-related activity continued to increase across more firms than it decreased, but the expansion became less widespread. Employment conditions remained positive. The employment index edged down from 11.8 to 9.1, with 67.6% of respondents reporting no change in staffing.
The average employee workweek index declined from 18.0 to 7.5, indicating that increases in working hours had also become less widespread. The results add another regional perspective to U.S. manufacturing conditions following a separate factory activity report from the New York Federal Reserve.
Selling Price Pressures Intensify
While demand indicators weakened, manufacturers reported broader increases in the prices charged to customers. The prices received index climbed from 31.3 in September to 40.1 in October, an 8.8-point increase and its highest reading since May 2025. About 41.1% of respondents reported increasing their selling prices, compared with 32.6% in September. Only 1.0% reported price decreases.
In contrast, the prices paid index, which measures the breadth of increases in input costs, fell from 48.6 to 43.2. That divergence is notable because firms reported less widespread increases in their input prices but more widespread increases in prices charged to customers.
The figures do not establish how rapidly actual prices increased. They measure the balance of firms reporting higher versus lower prices, rather than the percentage change in the prices themselves. Nevertheless, the elevated selling-price index indicates that price increases remained widespread even as orders weakened.
The combination provides another consideration for Federal Reserve policy, although a regional manufacturing survey alone cannot establish the direction of the central bank’s next interest rate decision.
Manufacturers Remain Cautiously Optimistic
Manufacturers continued to anticipate growth over the next six months, but their expectations moderated considerably. The future general activity index declined from 52.9 to 33.0, its second consecutive monthly drop and lowest reading since January. The future new orders index fell from 62.3 to 37.0, while the future shipments index decreased from 61.1 to 35.2.
Expectations for hiring also cooled. The future employment index declined from 50.6 to 30.1, although it remained positive. Despite that weaker near-term outlook, a special survey question revealed relatively firm investment intentions for 2027. About 52.2% of respondents expected total capital spending to increase next year, while 47.8% expected it to remain unchanged. None expected a reduction.
When the comparable question was asked a year earlier, 36% expected higher capital spending and 19% anticipated reductions, according to the Philadelphia Fed. That contrast suggests manufacturers remained willing to plan investments despite reporting slower growth in current orders and less widespread optimism about activity over the coming six months.
What the Survey Measures
The Philadelphia Fed’s Manufacturing Business Outlook Survey covers manufacturing firms in eastern and central Pennsylvania, southern New Jersey, and Delaware. Its survey methodology uses diffusion indexes calculated by subtracting the percentage of respondents reporting decreases from the percentage reporting increases. The results are seasonally adjusted.
A positive reading indicates that increases are more widespread than decreases. It does not measure the actual percentage growth of factory production, sales, or orders. October responses were collected from October 5 through October 12, making the survey an early indication of regional manufacturing conditions rather than a comprehensive measure of national industrial production.
The next Philadelphia Fed Manufacturing Business Outlook Survey is scheduled for November 19, 2026, at 8:30 a.m. Eastern Time, when updated readings will show whether the moderation in factory activity continued or stabilized.
