Mid-Atlantic Manufacturing Activity Remains in Contraction

Economic Indicators Dow Jones Newswires


Mid-Atlantic manufacturing improved modestly in February but remained weak, underpinning concerns that U.S. production will continue to contract as the strong dollar, a flagging energy sector and softer global demand pressure activity. 

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The Federal Reserve Bank of Philadelphia said its index of general business activity covering the regional factory sector rose to -2.8 from -3.5 in January. This month's reading marks the six straight month of contraction. 

Economists surveyed by The Wall Street Journal expected a decline to -4.0. 

An increase in shipments pushed the index up this month, but other gauges showed deteriorating conditions. New orders declined at a faster pace and head counts fell more markedly than in January. That is as the amount of hours employees worked continued to decline. 

A sharp pullback in capital spending across the oil patch has hit the country's manufacturing segment, and the rising U.S. dollar has pressured demand as it makes domestic goods more expensive abroad. At the same time, economic weakness outside of the U.S.--especially in China, where imports are down sharply--has added to the sector's troubles. 

"Weakness in the region's manufacturing sector continued this month," the report said, suggesting continued declines in new orders and overall activity. 

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The report out of the Philadelphia region follows a similar survey released last week by the New York Fed, which showed manufacturing conditions across New York improved after hitting a new postrecession low in January but remained very weak in February. Traders and economists use the Fed surveys, five in all, as clues ahead of a carefully-watched gauge of national production. The Institute for Supply Management will next release that report on March 1. 

Manufacturers in the Philadelphia region continued to express confidence that conditions would improve in the coming months, but their optimism faded further in February. A gauge of future expectations going out six months fell to 17.3 from 19.1. In December, that measure registered at 24.1. In response to a special question in this month's survey, respondents signaled pricing power would continue to diminish. 

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com