The Philly Fed Prices Paid index is a sub-component of the Philadelphia Federal Reserve's Manufacturing Business Outlook Survey. It tracks the change in prices that manufacturers in the Third Federal Reserve District pay for raw materials and other production inputs. As a precursor to the Producer Price Index (PPI), it serves as an early warning signal for inflationary pressures within the supply chain.
The index is calculated as a diffusion index: the percentage of manufacturers reporting higher prices minus the percentage reporting lower prices. A positive value indicates that more firms are experiencing price increases than decreases.