Philly Fed Index Unexpectedly Shows Steep Drop In February
February 16 2023 - 5:03AM
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Philadelphia-area manufacturing activity unexpectedly contracted
at an accelerated rate in the month of February, according to a
report released by the Federal Reserve Bank of Philadelphia on
Thursday.
The Philly Fed said its diffusion index for current activity
plunged to a negative 24.3 in February from a negative 8.9 in
January, with a negative reading indicating a contraction.
Economists had expected the index to inch up to a negative 7.4.
With the unexpected nosedive, the Philly Fed Index dropped to
its lowest level since hitting a negative 43.2 in May 2020.
The unexpected slump by the headline index partly reflected an
accelerated contraction in new orders, with the new orders index
falling to a negative 13.6 in February from a negative 10.9 in
January.
The shipments index also declined to 8.7 in February from 11.1
in January, while the number of employees index slid to 5.1 from
10.9.
While the report also showed the prices received index tumbled
to 14.9 in February 29.9 in January, the prices paid index inched
up to 26.5 from 24.5.
Looking ahead, the Philly Fed said most of the survey's future
indicators were positive but low, suggesting tempered expectations
for growth over the next six months.
The diffusion index for future general activity fell to 1.7 in
February from 4.9 in the previous month.
"Weakness in manufacturing has been persistent amid a weakening
in the global economy, past appreciation in the U.S. dollar and
higher interest rates stifling demand for goods," said Gurleen
Chadha, U.S. Economist at Oxford Economics.
She added, "With flaring worries of the economy falling into a
mild recession this year, the worst is likely ahead for
manufacturing."
A separate report released by the Federal Reserve Bank of New
York on Wednesday showed a significant slowdown in the pace of
contraction in regional manufacturing activity in the month of
February.
The New York Fed said its general business conditions index
soared to a negative 5.8 in February from a negative 32.9 in
January. Economists had expected the index to jump to a negative
18.0.
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