Philly Fed: Manufacturing Activity Contracted for the Sixth Straight Month

The Federal Reserve Bank of Philadelphia said that manufacturing activity contracted for the sixth straight month in February, albeit at a slower pace than in January. The composite index of general business activity rose from -3.5 in January to -2.8 in February. On the positive side, shipments (down from 9.6 to 2.5) continued to expand, but eased for the month. Pricing pressures for raw materials (down from -1.1 to -2.2) remained suppressed, largely due to falling energy costs. Other key measures reflected sliding levels of activity, including new orders (down from -1.4 to -5.3), employment (down from -1.9 to -5.0) and the average workweek (down from -2.2 to -12.9).

Overall, this report continues to reflect weaker-than-desired conditions in the region, with the strong dollar, soft exports markets and reduced commodity prices dampening activity. To illustrate this point, the percentage of respondents suggesting that new orders decreased for their company rose from 30.7 percent in January to 33.6 percent in February. At the same time, those noting increased demand edged down from 29.3 percent to 28.3 percent.

Looking ahead six months, manufacturers in the district remain cautiously upbeat about activity in their economic outlook. The forward-looking composite index declined from 19.1 to 17.3, but the data continue to indicate decent growth expectations for new orders (down from 21.1 to 19.8) and shipments (down from 22.0 to 20.2), albeit with less enthusiasm than in prior releases. More than 40 percent of respondents, for instance, anticipate increased new orders in the next six months. Nonetheless, the data also reflect continued softness, with softer-than-desired growth predicted for hiring (down from 5.5 to 2.3) and capital spending (down from 9.4 to 2.5) and a shrinking workweek (down from 2.1 to -12.5).

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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