The Philadelphia Fed reported that its Index of General Business Conditions in the manufacturing sector improved in February to 23.9 from an unrevised 13.2 the prior month. Consensus expectations had been for a reading of 17.5.

During the last ten years there has been a 69% correlation between the level of the Philadelphia Fed Business Conditions Index and three month growth in factory sector industrial production. There has been a 52% correlation with q/q growth in real GDP.

Shipments recovered sharply but orders improved just modestly as the number of employees fell. During the last ten years there has been a 64% correlation between the employment index and the three month growth in factory payrolls.

The business conditions index reflects a separate survey question, not the sub indexes.

The separate index of expected business conditions in six months also improved but just moderately.

The prices paid index fell to the lowest level in a year. During the last ten years there has been a 75% correlation between the prices paid index and the three month growth in the intermediate goods PPI. The correlation with the finished goods PPI has been 50% and with the CPI it's been 43%.

The Philadelphia Fed index is based on a survey of 250 regional manufacturing firms, but these firms sell nationally and internationally.

The latest Business Outlook survey from the Philadelphia Federal Reserve Bank can be found here.