Philadelphia Fed Manufacturing Index Remains Negative

The Philadelphia Federal Reserve reported that its regional manufacturing index showed a slight improvement in January, though it continued to signal an industry contraction for the fifth consecutive month. The index rose to a negative 10.6 from December's negative 12.8 reading. A number below zero denotes that manufacturing activity is in decline.

Expectations Versus Reality

Wall Street Journal economists were expecting a marginally better outcome with a projection of negative 8 for the January index. Despite the inherent disappointment, the index's modest rise suggests a slower pace of contraction in the region's manufacturing sector.

Exploring Key Indicators

Metrics for new orders and shipments did see some increased activity in January but remained ensconced in negative territory, indicating ongoing challenges for the sector. Furthermore, both the indexes tracking prices fell beneath their long-term averages during the month.

Looking ahead, the six-month business outlook index also painted a bleak picture, plummeting to negative 4, its lowest position since the previous spring.

National and Regional Comparisons

The Philadelphia Fed's index is known for providing early insight into the health of the manufacturing sector. For broader context, it's worth noting that other regional indexes, such as the New York State's Empire State Index, showed even more pronounced declines, falling to a negative 43.7 in January, the lowest point since May 2020. Meanwhile, the national ISM factory index has signaled contraction for over a year.

Market Implications

Market reactions were mixed following the Philadelphia Fed's announcement. The stock market was on track for a disparate opening, while early morning trading saw the 10-year Treasury yield ascend to 4.13%.

PhiladelphiaFed, Manufacturing, Index