The numbers: The Philadelphia Fed said Thursday its gauge of regional business activity fell to 16 from 23.2 in the prior month. Any reading above zero indicates improving conditions. Economists polled by the Wall Street Journal expected a 19 reading. Any reading above zero indicates expansion in the manufacturing sector.
The headline index is based on a single stand-alone question about business conditions unlike the national ISM manufacturing index which is a composite based on components
Key details: The barometer on new orders fell to 14.2 in February from 17.9 in the prior month. The shipments index fell to 13.4 from 20.8, the lowest reading since August 2020. The measure on six-month business outlook inched down to 28.1 from 28.7 in January.
Big picture: There are some signs that manufacturing is slowing down. and the latest reading of the Philadelphia diffusion index fits with that theme.
“Manufacturing…appears to have softened in the past two months, but at this stage it’s impossible to know if this is just a hit from worker absenteeism during the omicron wave, or the start of a softer trend,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
On Tuesday, a similar survey conducted by the New York Fed showed manufacturing activity only inched up to 3.1 in February after a surprise negative reading in the prior month.
Both the Philly Fed index and the Empire State index are seen as a good early reads on the health of the manufacturing sector. In January, the national ISM factory index fell for the third straight month to a 14-month low reading of 57.6, still well above the 50 reading that marks expansion from contraction.