Factory activity in the U.S. mid-Atlantic region contracted in February as new orders plunged, a survey showed on Thursday. The Philadelphia Federal Reserve Bank said its business activity index dove to a -6.3 reading, down from 9.4 in January.
That was far below Wall Street’s expectations of a reading of 8.0. Economists polled by Reuters expected a slight dip, but not a disturbing contraction.
A reading above zero indicates expansion, while a reading below zero indicated contraction, which now appears to be the case in the region. The regional survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.
New orders fell to a -5.2 reading down from 5.1 the month prior, a wild swing. Growth in the employment component decelerated, with the index down to 4.8 from 10.0.
The survey is seen as one of the first monthly indicators of the health of U.S. manufacturing leading up to the national report by the Institute for Supply Management. The latest economic news has not been good thus far for the month of February, validating economists’ concerns that the economy is once-again losing steam.
On Tuesday, the New York Fed manufacturing index fell to 4.48 in February, from 12.51 the month prior, widely missing Wall Street’s expectation of a reading of 9. U.S. homebuilder confidence suffered its largest one-month drop ever in the month of February, falling below the key 50 mark for the first time since May.
And Wednesday was no better.
U.S. housing starts recorded their biggest drop in almost 3 years in January, as the third consecutive month of declines in permits confirmed weakness in the housing market. The Commerce Department said Wednesday new permits plummeted 16 percent to a seasonally adjusted annual rate of 880,000 units, which is the lowest level since September.
The percentage drop, alone, was the largest since February 2011.
Yet, the Federal Reserve’s policy-setting board agreed unanimously that the central bank should continue cutting the pace of asset purchases in the Fed QE3 program in what was referred to as “measured steps.” As we discussed, the new measurement for PPI showed prices for finished goods rose 0.2 percent in January, while excluding the food and energy components, prices also rose 0.2 percent.
The Department of Labor, for the first time since 1978, is now using a revamped method for calculating prices, one in which economists say offers a broader and more accurate look at prices across the economy. However, markets rallied toward the end of the day on data showing a bit of hope for the manufacturing sector.
A report from Markit showed the factory sector revving up at a much faster pace in February than the month prior. The PMI gauge jumped to 56.7 — a nearly four-year high — from 53.7.
“The flash manufacturing PMI provides the first indications that production has rebounded from the weather-related slowdown seen in January,” Markit’s chief economist, Chris Williamson, said in the report. “While the strong PMI reading in part represents are rebound from the temporary weakness seen at the start of the year, further growth looks likely in coming months, suggesting the underlying health of the economy remains robust.”
Either way, economists are not all that convinced, but they seem adamant about blaming the cold weather for the latest economic news.