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Economy in Brief

Philadelphia Fed Factory Index Weakens in February
by Tom Moeller  February 17, 2022

• New & unfilled orders decline. Employment improves.

• Delivery times ease for third straight month.

• Prices paid backpedal.

The Federal Reserve Bank of Philadelphia's Manufacturing Business Conditions Index declined in February to 16.0 from 23.2. The figures are down from an April 2021 high of 50.2 The Action Economics Forecast Survey looked for a lesser decline to 20.0. The percentage of firms reporting improving conditions declined to 26.3% from 30.6% in January, while the share reporting weaker conditions rose to 10.3% from 7.4% in January. The share reporting no change rose to 63.4% from 59.6% last month. The headline index reflects the answer to a single question.

Haver Analytics calculates an ISM-Adjusted General Business Conditions Index from five components using the same methodology as the national ISM index. That figure rose to 58.5 in February from 57.6 in January.

Performance of the subindexes was mixed this month. The new orders index fell to 14.2 from 17.9 in January. The shipments index weakened to 13.4, the lowest level since August 2020. The delivery times index fell to 23.0 from 25.2 in January. A slightly higher 33.0% of respondents reported quicker speeds while a greatly increased 10.0% reported slower speeds. A lessened 56.6% reported no change. Working the other way, the inventory index rose to 4.0 in February from 3.1, but both numbers remained well below the 2021 highs.

The employment index improved to 32.3 this month from 26.1. The average workweek reading also improved to 10.8 in February from 9.6 in January, but it remained well below the high of 36.4 last March.

The price paid reading fell to 69.3 in February from 72.5 in January. The figure is below last year's high of 80.7 in June. A slightly increased 73.9% of respondents paid higher prices while 4.7% paid less, up from none in January. The index of prices received rose to 49.8 this month from 46.4 in January. It remained below the November 2021 high of 62.9.

The Philadelphia Fed also surveys expectations for business activity in the coming six months. The expectations index for future activity eased 28.1 this month from 28.7 in January. New orders, shipments and employment declined and the delivery times reading plummeted. The expected prices paid and received readings both weakened.

The survey panel consists of 150 manufacturing companies in the third Federal Reserve District (which consists of southeastern Pennsylvania, southern New Jersey and Delaware). The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease in activity. The ISM-adjusted figure, calculated by Haver Analytics, is the average of five diffusion indexes: new orders, shipments, employment, delivery times and inventories with equal weights (20% each). Each ISM-adjusted index is the sum of the percent responding "higher" and one-half of the percent responding "no change."

The figures from the Philadelphia Federal Reserve dating back to 1968 can be found in Haver's SURVEYS database. The expectation from the Action Economics Forecast Survey is available in AS1REPNA.

Philadelphia Fed - Manufacturing Business Outlook Survey (%, SA) Feb Jan Dec Feb'21 2021 2020 2019
General Factory Sector Business Conditions 16.0 23.2 15.4 28.7 30.5 7.9 9.9
ISM-Adjusted Business Conditions 58.5 57.6 60.2 61.4 61.4 52.3 55.5
  New Orders 14.2 17.9 13.7 25.7 27.2 8.9 14.1
  Shipments 13.4 20.8 15.3 28.0 24.9 9.7 16.9
  Unfilled Orders 15.8 23.5 11.4 13.9 19.1 0.4 7.7
  Delivery Time  23.0 25.2 31.4 16.1 29.3 5.1 9.4
  Inventories 4.0 3.1 13.2 21.7 12.6 -0.2 5.1
  Number of Employees 32.3 26.1 33.9 24.9 28.2 5.0 16.9
  Average Workweek 10.8 9.6 30.4 30.4 27.9 4.4 9.8
  Prices Paid 69.3 72.5 66.1 55.2 68.9 16.6 19.7
Expectations - General Business Conditions; Six Months Ahead 28.1 28.7 19.0 40.0 42.7 46.3 28.4
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