Philadelphia Fed nonmanufacturing index slides to -22.0, down from -10.6

• The regional activity index dropped to -22.0 from -10.6 in the prior reading, making it the lowest since June.
• New orders stood at -2.2, improving from -10.1 previously.
• The sales and revenues index slipped to 6.8, down from 7.9 before.
• Full-time employment jumped to 19.0 versus 2.1 earlier, reaching its highest point since June 2022.
• Part-time employment climbed to 10.7 from 1.1 in the prior survey.
• Prices paid increased to 37.8, compared with 29.2 previously.
• Prices received rose to 20.0 from 10.3, the highest since June.
• Wage and benefit costs edged up to 40.7 from 39.2.
• The average workweek index improved to 8.5 from -13.4.
• Capital spending on equipment and software surged to 33.0, up from 8.8.
• The six-month outlook for firm activity rose to 20.3, compared with 12.4 before.
• The six-month regional outlook turned positive at 2.0, up from -6.3.

Although this survey is considered second-tier, several internal components stand out. The full-time employment gauge advanced 17 points to its strongest reading in over four years, as 27% of respondents reported hiring, compared with 14% in August. That result contradicts the story of a labor market with low hiring and firing rates, even if it comes from a single regional survey with a limited sample. A number of forward-looking indicators also showed gains.

However, new orders and the main headline figure remained weak, and prices paid and received are climbing once more. Given the economy's resilience and energy costs, this outcome is not unexpected.

On the special questions section, 55% of companies anticipate third-quarter revenue growth relative to the second quarter, while 24% expect a decrease — a reasonably positive quarter overall. Energy markets were named as a constraint by 63% of firms, lower than 83% last quarter, yet 57% predict that the pressure will intensify over the next three months. Uncertainty continues to be the biggest worry, with 79% describing it as at least a minor constraint and 29% calling it a major one.

Capital expenditure plans provide a bright spot. The equipment and software index almost quadrupled to 33.0, while physical plant capex increased to 22.9. Companies investing in both workforce and equipment are not preparing for a recession, regardless of their regional commentary.