Philadelphia Fed Manufacturing Index Improves Sharply in February

The Federal Reserve Bank of Philadelphia reported in its February survey of manufacturing activity that the Current Activity Diffusion Index moved up to 5.2 this month from -10.6 in January and -12.8 in December. The last positive reading was 7.7 in August. An index reading of -9.0 had been expected in the Action Economics Forecast Survey. The Philly Fed survey responses were collected from February 5 to February 12.

The ISM-Adjusted Composite Index, calculated by Haver Analytics from the survey results, rose to 45.2 this month from 41.9 in January. Below 50, it still suggests a net contraction in activity. It compared to a March 2023 low of 39.6.

Changes in the individual series mostly improved this month. New orders rose to -5.2 from -17.9 in January. An improved 27.7% of respondents reported an increase in new orders while a lessened 32.8% reported a decline. The shipments index rose to 10.7 from -6 .2, as a higher 38.0% reported increased shipments and 27.3% reported declines. The unfilled orders measure rose to -11.7 from -18.5 in January. Eleven percent reported an increase in order backlogs while 22.4% reported a decline. The delivery times index also moved up to -21.1 from -27.6 as 2.5% of respondents reported quicker delivery speeds and 23.6% reported a slowdown. The inventories reading rose to -2.8 this month, negative for the fifth straight month.

Job market conditions deteriorated this month as indicated by an employment reading which fell to -10.3 from -1.8 in January. Four percent of respondents reported more hiring while 14.8% reported less. Moving the other way, the average workweek figure improved to 1.4 after four straight negative readings.

The index of prices paid rose this month to 16.6 after January’s decline to the lowest level since April 2023. This reflected 20.5% of respondents reporting increased prices and 3.9% reporting a decline. Holding fairly steady at 6.2 was the prices received index. It remained up from a low of -2.7 in May of last year. A higher 11.4% of respondents reported price increases and an increased 5.2% reported declines.

Expectations for business conditions in the next six months improved with the reading of 7.2, but it remained down from 12.6 in December. It remained down from a high of 21.6 in July of last year. Expected shipments & new orders improved and employment expectations rose to the highest level in four months while the expected workweek reading was the highest since July of last year. Expectations for prices paid also strengthened following a sharp decline at the end of last year. The prices received index also recovered its January decline.

The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The Philadelphia Fed data can be found in Haver's SURVEYS database. The expectations forecast figures are from the Action Economics Forecast Survey in AS1REPNA.