The Philadelphia Fed's Index of General Business Conditions in the manufacturing sector fell in March to 11.4 from an unrevised 23.9 in February. Consensus expectations had been for a reading of 20.0. The latest was the lowest reading since July 2003.

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.

The shipments index fell a hard 9.1 points. The number of employees fell 2.2 points and the index level is half what it was last summer but new orders rose again off the January low. 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 improved moderately to the highest level this year.

The prices paid index fell again, to the lowest level since November 2003. 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.