Philly Fed Stays Negative, but With Slight Uptick

The Federal Reserve Bank of Philadelphia has released its regional report on manufacturing conditions in February. Its Manufacturing Business Outlook Survey showed that the general business conditions improved slightly, albeit still at a slight loss, to -2.8 in February. The reading from January was -3.5.

That was the diffusion index for current activity. Bloomberg was calling for a consensus at -2.5 and the Econoday range was -7.5 to 2.8. Dow Jones (via the Wall Street Journal) also had its consensus estimate at -2.5.

Manufacturing firms were asked about expected changes in prices received for goods and services over the next year. Thursday’s report summary said:

The indicator for general activity remained slightly negative this month, edging up only marginally from its reading in January. Other indicators offered mixed signals: The shipments index remained positive, but new orders and employment indexes remained negative and declined modestly. The survey’s price indexes suggest that both input prices and selling prices fell this month. With respect to the manufacturers’ forecasts, the survey’s future indicators remained overall positive but showed continued weakening.

Weakness in the region’s manufacturing sector continued this month, according to firms responding to the February survey. Indexes suggest continued modest declines in activity and new orders but a continued rise in shipments. Employment indicators suggest slight decreases in overall manufacturing employment this month. Indicators for future conditions remained positive overall but continued to trend downward.

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Other key points were noted as follows:

• The index for current new orders remained negative and edged down four points, to -5.3.
• Firms reported an increase in shipments; the shipments index remained positive for the second consecutive month but fell seven points from January.
• Firms reported continued declines in inventories, and the inventories index remained negative.
• Firms’ backlogs of unfilled orders were in decline again this month, and delivery times were shorter, according to the responding firms.
• The survey’s labor market indicators suggest continued weak employment conditions. The employment index decreased three points, from -1.9 to -5.0.
• About 63% of the firms reported no change in employment this month, and the percentage reporting decreases (20%) was slightly larger than the percentage reporting increases (15%).
• The indexes for both prices paid and prices received were negative. Most firms (66%) reported no changes in the prices for their own manufactured products this month. The percentage of firms reporting lower prices (18%) was slightly greater than the percentage reporting higher prices (14%).
• The current prices received index decreased from -2.8 to -4.5 and has recorded eight consecutive negative readings.
• Firms reported, on balance, declines in the prices paid for inputs. The percentage of firms reporting lower input prices (21%) was greater than the percentage of firms reporting higher input prices (19%).
• The prices paid index decreased one point and remained negative for the sixth consecutive month.
• The diffusion index for future general activity fell from a reading of 19.1 in January to 17.3 this month. The index has trended down since last summer and is now at its lowest reading since November 2012.
• The median forecast was for an increase in their own prices of 1.3%, a rate of increase lower than the rate of inflation expected to be faced by the workers they employ regionally (2%) and lower than the rate of inflation expected for the average U.S. consumer (2%).
• Firms expect their own per employee compensation costs (wages plus benefits) to rise by 3% over the next four quarters.