The numbers: The production of the Philadelphia Fed dropped sharply into a negative territory. The index fell to a seasonally adjusted reading of -4.1
Any reading below zero indicates a worsening condition. Economists have been questioned by Econoday for the expected reading of 14.
What happened: Below the headline, the indexes for new orders and shipments dropped sharply into a negative territory. The employment indicator remained positive. Firms were generally optimistic about the outlook for the next six months.
The big picture: The sharp drop fits with other manufacturing data suggesting the U.S. is now succumbing to the global industrial downturn. The Empire State index was rebounded in February but remained close to a two-year low. The flash U.S. Manufacturing PMI fell to the worst level in 17 months.
What are they saying? "We have read the sharp drop in February orders and shipments along with a modest inventory build as likely to reflect the effects of government shutdown … and concerns about the budget process that could have led to the second shutdown in February. If so, we could expect a rebound in current conditions in March, "said Michael Gapen, chief U.S. economist at Barclays.
Other economists, such as David Rosenberg of Gluskin Sheff, were less sanguine.
The Philly Fed survey was the icing on the cake for bond-bull view. The special question showed that companies expect consumer inflation to be 2.3% in the coming year and 2.5% in the next decade – both in a sharp decline from last month's 3%
– David Rosenberg (@EconguyRosie) February 21, 2019
Market reaction: The Dow Jones Industrial Average
opened the lower Thursday but the index is up more than 19% from its 52-week low hit on Dec. 24.