Philly Fed index surges to 43.3 in February
Manufacturing conditions in the Philadelphia region unexpectedly improved in February, according to the latest report from the Federal Reserve Bank of Philadelphia.
The index for current manufacturing activity surged to 43.3 from 23.6 in January, remaining in positive territory for seven consecutive months and smashing expectations for a decline to 18.0.
Meanwhile, the index for current new orders increased 12 points from January, while the shipments index was up eight points.
The Federal Reserve Bank of Philadelphia said: “Results from the February Manufacturing Business Outlook Survey suggest that growth in regional manufacturing is broadening. The diffusion indexes for general activity, new orders, and shipments were all positive this month and increased notably from their readings last month. The surveyed firms continued to report growth in employment and work hours.
“Although they moderated from last month, the future indexes for growth over the next six months continued to reflect a high degree of optimism.”
Capital Economics said: "The jump in the Philly Fed manufacturing index to a 33-year high of 43.3 in February, from 23.6, is another illustration that the factory sector is over the headwinds created by the dollar’s sharp rise in 2014/ 2015 and the commodities slump. The Philly Fed index is now at a level that, based on the historical relationship, would point to GDP growth of slightly more than 6%.
"Before we get too carried away, it’s important to stress that this is a regional indicator that can be very volatile from month to month. Nevertheless, the alternative Empire State index covering NY did improve to 18.7 in February, from 6.5, although that is only consistent with 3% GDP growth. And the NFIB small business optimism index hit an 11-year high in January. All in all, it’s been a very good week for activity survey releases. The actual manufacturing output data are still lagging behind though, with only a 0.2% m/m gain in January."