U.S. factory activity in the mid-Atlantic region slowed in January, according to firms responding to this month’s Manufacturing Business Outlook Survey.
The Philadelphia Federal Reserve Bank said its business activity index fell to 6.3, which is the lowest since February 2014, plummeting from 24.3 in December. That widely missed economists’ expectations for 19.9, according to a Reuters poll.
Any survey reading above zero indicates expansion in the region’s manufacturing sector, which covers factories in eastern Pennsylvania, southern New Jersey and Delaware.
Along with The New York Federal Reserve’s Empire State Manufacturing Survey, the index are 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 predominant New York manufacturing index emerged from contraction territory in January, clocking in at 9.95 from -1.23 the month prior. It was the first contraction in regional manufacturing activity in two years.
The survey’s broadest measure of manufacturing conditions — the diffusion index of current activity — decreased 18 points from a revised 24.3 in December to 6.3 (see Chart 1). Demand for manufactured goods decreased 5 points, down from a revised reading of 13.6 last month to 8.5. Further, shipments also fell, with its index bottoming out 22 points to -6.9, its first negative reading since February 2014. Firms reported shorter delivery times and a decrease in unfilled orders this month, on balance.
As with the Empire State Manufacturing Index, signs of a weakening labor market in manufacturing were present.
“Firms’ responses suggest weaker labor market conditions in January. The percentage of firms reporting a decrease in employees (15 percent) exceeded the percentage reporting an increase (13 percent) for the first time in 19 months,” the report stated. “The current employment index fell 10 points, from 8.4 to -2.0. Firms also reported reductions in the workweek: The percentage of firms reporting a shorter workweek (23 percent) was greater than the percentage reporting a longer workweek (16 percent).”
