Philadelphia Fed Nonmanufacturing Index Turns Positive at 7.4, First Expansion Signal Since October 2024

The Philadelphia Fed's nonmanufacturing sector returned to expansion in July, delivering its first positive headline reading since October 2024. The survey's regional general activity diffusion index rose to +7.4 in July from -25.8 in June, a month-to-month swing of more than 33 points. The measure reflects whether service-sector firms across Delaware, southern New Jersey, and eastern and central Pennsylvania are seeing activity expand or contract; readings above zero indicate more firms reporting growth than decline. Beneath the headline, firm-level general activity improved to +17.5 from +2.4. Among respondents, 27.8% reported higher activity, while 10.3% reported a decrease. Demand indicators also firmed. New orders increased to +12.5, and the sales and revenues index climbed to +23.5. Employment measures moved into positive territory as well. Full-time employment came in at +12.4, and part-time employment registered +12.1. Price pressures remained elevated. The prices paid index was +28.2 and prices received was +18.4, pointing to broad-based increases in input costs and partial pass-through to customers. The Philly Fed's Nonmanufacturing Business Outlook Survey (NBOS) is often viewed as a window into broader mid-Atlantic conditions. July responses were collected from July 6 to July 16. With the last positive reading in October 2024, the region has spent roughly nine months in contraction or near-contraction. Forward-looking sentiment strengthened sharply: expectations for future firm-level activity jumped to +41.9. For investors, the combination of improving growth signals and persistent price pressures underscores a familiar policy tension. If inflation stays sticky as activity rebounds, the Federal Reserve may face tougher trade-offs between supporting growth through rate cuts and preventing renewed price acceleration. The scale of July's jump also raises questions about durability, making the August reading an important checkpoint on whether momentum holds or fades.