Philadelphia Fed Factory Index Tumbles in February
by:Tom Moeller
|in:Economy in Brief
Summary
- Index plunges to lowest level since 2020.
- New orders, shipments and employment readings weaken.
- Prices paid index remains near recent low.
The Federal Reserve Bank of Philadelphia reported that its Composite Index of Business Conditions plunged to -24.3 during February from -8.9 in January. The index now stands at the lowest level since May 2020 and remained below its peak of 45.6 in April of 2021. It has been negative for eight of the last nine months. A reading of -7.4 had been expected in the Action Economics Forecast Survey.
The ISM-Adjusted Composite Index fell to 48.6 this month from 49.2 in January and continued to indicate a contraction in overall factory sector activity. It was well below its high of 65.4 in November 2021.
Movement amongst the component series varied. The new orders series fell to -13.6 in February from -10.9 in January. A lessened 21.7% of respondents reported orders improvement while a smaller 35.3% reported orders deterioration. The shipments index declined to 8.7 this month from 11.1 in January. These figures are down from 32.1 last May. A lessened 26.6% of respondents reported shipments improvement while a lessened 17.9% reported a decline. The delivery times reading dropped to -13.6 from -5.6, indicating a significant pick-up in product delivery speeds. The unfilled orders index remained negative for the ninth straight month. Working the other way, the inventories index surged to 15.3 after having been negative for most of the last nine months.
On the labor front, the employment index fell to 5.1 in February from 10.9 in January. It remained well below its April 2022 peak of 38.4 as a lessened 20.5% of respondents reported more hiring and an increased 15.4% reported less. The hours-worked index weakened to -3.2 and remained below its high of 35.3 in March of 2021.
The prices paid index edged higher to 26.5 from 24.5 in January. It has fallen from a high of 83.6 in November 2021. A lessened 34.2% of respondents reported higher prices while a fewer 7.7% reported price declines. The prices received index fell sharply to 14.9 from 29.9 in January. It stood at it its lowest point in two years, down from a high of 65.8 in November 2021.
The future business conditions index declined to 1.7 this month from 4.9 in January. These were first positive readings since June of 2022. Components were weak and most declined from January, except new orders & employment which improved. The expected prices paid index plunged to the lowest level since the recession.
The Philadelphia Fed data can be found in Haver's SURVEYS database. The expectations figures are from the Action Economics Forecast Survey in AS1REPNA.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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