Philly Fed manufacturing beats but businesses are still struggling

The Philadelphia Federal Reserve’s manufacturing index was better than expected for February.

But details of the report showed that manufacturing activity in the region is still weak.

The headline index was -2.8, higher than the estimate for -3.5 according to Bloomberg.

The new orders index fell to -5.3 from -1.4. The employment index fell a bit and was still negative, while shipments stayed positive. And, the index for future general activity dropped to the weakest level in over three years.

The special question to manufacturers in February was about expected changes to prices received for goods and services over the next year.

From the release: “The median forecast was for an increase in their own prices of 1.3 per cent, a rate of increase lower than the rate of inflation expected to be faced by the workers they employ regionally (2 per cent) and lower than the rate of inflation expected for the average U.S. consumer (2 per cent).”

In a client note, Pantheon Macroeconomics’ Ian Shepherdson wrote, “The weighted sum of the Philly components has recently overshot relative to the ISM, so these number merely bring the two series closer together. We remain of the view that the worst is over for manufacturers, though we do not expect a sustained near-term rebound.”

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