Here’s something we don’t see very often. The February report on Manufacturing in the Philadelphia region came in better than expected for the second month in a row. While economists were forecasting the headline reading on Business Conditions to come in at a level of -3.0, the actual reading came in at -2.8. Yes, it was a minuscule beat, but in the weak environment of late, we’ll take what we can get. That’s the good news. The bad news is that the Philly Fed headline index has now been negative for six straight months, which is the longest streak of negative readings since 2012 when we saw seven straight negative months.
Within this month’s Philly Fed report there was something we saw that is even more uncommon. Take a look at the table to the right. As shown, although the General Business conditions of this month’s report showed a small sequential improvement, every other component declined, and in more than a few instances the drops weren’t trivial. Average workweek dropped more than ten points while number of employees fell to its lowest level in close to three years. Delivery times fell to its lowest level since late 2012, and shipments, while still positive, saw the third-steepest decline of any component. In the history of the Philly Fed report going back to 1980, there has only been one other month where we saw an increase in the headline index of the Philly Fed but declines in every other component. That one period was in July 1982 (which by the way was a month prior to a bottom in stocks that preceded a five-year bull market), and the summary table for that month is shown below.