Haver Resources
Feb 20

U.S. Philadelphia Fed Index Falls in February but Remains at an Expansion Level

Summary
  • Despite its drop, Current General Activity Index (18.1) stays in positive territory, suggesting continued expansion in mfg. activity.
  • Key subindexes remain positive: Shipments (26.3), New Orders (21.9), and Employment (5.3).
  • Inflation indicators are at a two-year high and above their long-run averages.
  • Future General Activity Index (27.8), while falling, remains in positive territory, albeit w/ less widespread expectations for overall future growth.

The current general activity diffusion index fell to 18.1 in February following a 55.2-point surge to 44.3 in January, according to the latest Manufacturing Business Outlook Survey (MBOS) conducted by the Federal Reserve Bank of Philadelphia, indicating continued expansion in manufacturing activity in the Third Federal Reserve District this month but at a slower pace. The February index registered the third m/m fall in four months but remained above its long-run nonrecession average; it was above 2.5 in February 2024. A reading of 20.0 for February had been expected by the Action Economics Forecast Survey. A 40.5% of the firms reported increases in general activity in February (down from 50.9% in January), while 22.5% reported decreases (up from 6.6%); 34.7% reported no change (down from 40.7%). Responses to this month’s survey were collected from February 10 to February 17.

Haver Analytics calculates an ISM-adjusted current activity diffusion index from five key components using the methodology along the lines of the national ISM index. The index fell to 55.3 in February after a 12.4-point gain to 61.3 in January, indicating manufacturing activity expanded for the second successive month after contracting in December and November; it was up from a contraction-level 44.9 in February 2024.

In the latest survey, the new orders index fell to 21.9 in February after surging to 42.9 in January and the shipments index fell to 26.3 after jumping to 41.0; nevertheless, having remained elevated relative to their long-run averages. The inventories index decreased to -0.4 in February, the second negative reading in three months, after rising to 11.7 in January. The unfilled orders index dropped to 1.4, the lowest level since October, from January’s 24.0. Meanwhile, the delivery times index rose to a six-month-high 12.4 in February from 6.8 in January.

On the labor front, the number of employees index declined to 5.3 in February after rising to 11.9 in January, suggesting an overall increase in employment for the fourth straight month but at a slower pace. A 10.4% of respondents reported increases in employment in February while 5.1% reported declines; a hefty 84.6% reported no change in employment levels. The average employee workweek index fell to 2.9 in February, the third positive reading in four months, after jumping to 20.5 in January.

Inflation indicators remained elevated this month. The prices paid index rose to 40.5 in February, the highest level since October 2022, after advancing to 31.9 in January. A higher 45.3% of respondents reported increases in input prices in February while a small 4.8% reported decreases. The prices received index rose to 32.9 in February, the highest level since November 2022, after jumping to 29.7 in January. A 33.5% of respondents reported increases in prices received while only 0.6% reported decreases.

The future indicators generally remained in positive territory but showed less widespread expectations for overall growth over the next six months. The future general activity diffusion index declined to 27.8 in February, the lowest level since September, after rising to 46.3 in January. The following future indexes fell in February (vs. January) but remained in positive territory: unfilled orders (11.0 vs. 14.5), inventories (16.4 vs. 20.2), employment (23.7 vs. 40.4), new orders (33.1 vs. 57.3), and shipments (36.5 vs. 60.2). Notably, the future capital expenditures index slid to 14.0 in February, the lowest level since August, from 39.0 in January. Prices continued to increase albeit with a less rising pace, with the future prices paid index falling to 58.6 in February from 67.3 in January and the future prices received index falling to a four-month-low 46.1 from January’s 53.6.

The Manufacturing Business Outlook Survey (MBOS), conducted by the Federal Reserve Bank of Philadelphia, is a monthly survey of manufacturers in the Third Federal Reserve District. Participants indicate the direction of change in overall business activity and in the various measures of activity at their plants. The diffusion indexes in the MBOS represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. The series from the survey dating back to May 1968 can be found in Haver’s SURVEYS database. The expectations forecast figures are from the Action Economics Forecast Survey in AS1REPNA.

About The Author

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Winnie Tapasanun

Haver Analytics is pleased to bring Winnie Tapasanun’s commentaries on the state of the U.S. economy to its clients. Winnie Tapasanun has been working for Haver Analytics since 2013. She has almost 20 years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations.

Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia.

Winnie is bilingual in English and Thai with competency in French. She loves to travel (almost 30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.

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