Markets & Finance

The Philadelphia Story: Accelerating Weakness


The

Philadelphia Fed index, a widely-watched barometer of regional economic activity, plunged to -36.8 in January from December's revised -4.2 (-6.1 previously). This is the lowest reading since the recessionary period of December 1990.

Weakness was widespread, but orders and shipments paced the decline. The new orders index plummeted to -30.9 from a revised 4.0, while shipments fell to -30.8 from 3.1. Employment fell to -23.5 from -12.4. Prices paide dipped to 12.9 from 15.8. Though only a regional survey, the data do reflect the accelerating erosion in manufacturing.

The surprisingly steep drop in the Philly Fed index leaves the headline figure much more in line with the weakness seen in the last recession. Up until this point, the overall index had remained well above the "hard-landing" trough of -20.8 seen in June 1995 or the recessionary trough of -48.2 seen in October 1990. But the January reading of -36.8 does leave the index flirting ominously close to the low point seen in the last

recession.

The bottom line? Data like these could force the Fed's hand to a more aggressive 50 basis point ease at the January

Federal Open Market Committee meeting. From Standard & Poor's Global Markets


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