US DATA: Philly Fed Points To Strong Activity, But Rising Prices And Uncertainty
The Philadelphia Fed's Manufacturing Business Outlook Survey diffusion index for current general activity came in a little higher than expected in February, at 18.1 (14.3 expected, 44.3 prior). But consistent with other surveys conducted this month, the Philly Fed internals suggested stronger price pressures and greater uncertainty about the outlook.
- While the 26.2 point dropoff versus January was sizeable, this should be considered in the context of January's 55.2 point rise, which was the 2nd highest in series history (June 2020 set a record with a 71.3 point improvement). January aside, February's would have been the highest reading since March 2022.
- However, the current indicators looked somewhat more solid than the forward-looking metrics. Shipments pulled back to 26.3 from 41.0 - other than January, still the highest reading since 2022. New orders fell 21 points to 21.9, again robust by historical comparison (again aside from January it would have been a 39-month high). But employment dipped 6.6 points to 5.3, and the 6-month outlook index dropped 18.5 points to 27.8, a 5-month low. Expected capex collapsed to 14.0, a 6-month low, from a post-2021 high 39.0 in January.
- We note that the Empire Manufacturing survey for February - which MNI thought showed signs of concern over tariffs on neighboring Canada - also saw a sharp drop in the 6-month outlook and a slip in employment. And just as the Empire Manufacturing survey earlier in the week showed multi-year high price pressures for New York State firms, the Philly survey saw current prices paid rise to 40.5 (28-month high) and prices received to 32.9 (27-month high).
- Unlike the Empire State, expected 6-month prices paid dipped slightly, to 68.6 (vs 67.3 prior), with expected prices received also down to 46.1 (vs 53.6 prior), though these remained elevated readings versus those seen in 2023-early 2024.
- Again, it's unclear to what degree tariffs are playing a part. But overall while regional manufacturing activity looks solid in early 2025, there is elevated uncertainty, with the survey suggesting mounting price pressures in the pipeline.
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