Philly Fed Index Pulls Back Sharply But Still Indicates Growth In February

(RTTNews) - Philadelphia-area manufacturing activity continued to expand in the month of February, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, although the index of activity in the sector pulled back sharply.

The Philly Fed said its diffusion index for current general activity plunged to 18.1 in February after skyrocketing to 44.3 in January, but a positive reading still indicates growth. Economists had expected the index to slump to 20.0.

The steep drop by the headline index came as new orders index dove to 21.9 in February from 42.9 in January and the shipments index tumbled to 26.3 in February from 41.0 in January.

Despite the significant decreases, the Philly Fed noted the indicators for current general activity, new orders and shipments remain elevated.

The number of employees index also slid to 5.3 in February from 11.9 in January but still indicates job growth in the sector.

Meanwhile, the report said the prices paid index jumped to 40.5 in February from 31.9 in January, reaching its highest level since October 2022.

The prices received index also rose to a two-year high of 32.9 in February from 29.7 in the previous month.

Looking ahead, the Philly Fed said firms continue to expect growth over the next six months, although expectations were less widespread.

The diffusion index for future general activity dove to 27.8 in February after surging to 46.3 in January amid sharp pullbacks by the future new orders and shipments indexes.

A separate report released by the Federal Reserve Bank of New York on Tuesday showed a turnaround by regional manufacturing activity in the month of February.

The New York Fed said its general business conditions index jumped to a positive 5.7 in February from a negative 12.6 in January, with a positive reading indicating growth. Economists had expected the index to climb to a negative 1.0.

Meanwhile, the report said optimism about the outlook for conditions over the next six months dropped significantly, with the index for future business activity slumping to 22.2 in February from 36.7 in January.