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The Philly Fed's production index slips into a negative territory in February for the first time in nearly three years





Bloomberg News / Landov

The smoke rises from a refinery at the sunset in Philadelphia.

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

from 17 in the previous month. This is the first negative reading since May 2016.

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.

Market reaction: The Dow Jones Industrial Average

                            
                            
                                  
      
      
      
      
      
      
      
      
      
                            
                                     DJIA, -0.35%

opened the lower Thursday but the index is up more than 19% from its 52-week low hit on Dec. 24.


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