(RTTNews) - Activity in the Philadelphia-area manufacturing sector contracted at a much faster than expected pace in the month of February, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday.

The report showed that the index of activity in the sector fell to a negative 41.3 in February from a negative 24.3 in January, with a negative reading indicating a contraction in the sector. Economists had expected the index to edge down to a negative 25.0.

With the bigger than expected decrease, the Philly Fed index fell to its lowest reading since October of 1990.

The Philly Fed noted that all of the survey’s broad indicators for current activity remained negative and fell from their already low levels in January.

The new orders index fell to a negative 30.3 in February from a negative 22.3 in January, while the shipments index fell to a negative 32.4 from a negative 16.7. The shipments index fell to its lowest reading since the survey began in 1968.

Employment losses in the sector were also more substantial this month, with the number of employees index falling to a negative 45.8 in February from a negative 39.0 in the previous month. The employment index was also at its lowest reading in the history of the survey.

The Philly Fed noted that nearly half of the surveyed firms reported declines in both employment and average hours worked.

The report also showed a continued decrease in prices, although the pace of contraction in prices paid slowed compared to January. The prices paid index rose to a negative 13.7 from a negative 27.0, while the prices received index edged down to a negative 27.8 from a negative 26.2.

At the same time, expectations for future conditions improved for the second consecutive month, which the Philly Fed said suggests that the current slump will bottom out in the next six months.

The future general activity index rose to 15.9 in February from 7.4 in January, its second positive reading since September 2008. The indexes for future new orders and shipments also improved, although firms still expect decreases in employment over the next six months.

Earlier this week, the New York Federal Reserve also released the results of its regional manufacturing survey, showing that activity in the sector deteriorated by more than expected.

The report showed that the index of activity in the sector fell to a negative 34.7 in February from a negative 22.2 in January. Economists had expected the index to slip to a negative 24.0.

At the time, Peter Boockvar, equity strategist at Miller Tabak said, “Weakness in the manufacturing sector is nothing surprising, but the continued deterioration is something the market will continue to react to negatively.”

Looking ahead, the New York Fed said the future general business conditions index fell to a negative 6.6 in February from a negative 4.0 in January.

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Posted in Categories: Economy, Forex, Releases, USA.

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