Philly Fed index seen still negative in February
NEW YORK (Reuters) - Factory activity in the U.S. Mid-Atlantic region is likely to have posted a third month of contraction when February data is released on Thursday, adding to suspicions that recession has taken hold nationally.
Economists expect the Philadelphia Federal Reserve Bank's business activity index to come in at minus 11.0 in February, which would be a statistical improvement from negative 20.9 in January but still an unambiguous contraction.
The 46 estimates in the Reuters poll ranged from minus 18 to 0.0. January's result was the weakest since the recession of 2001 and followed December's reading of minus 1.6.
Any reading below zero indicates contraction in the region's manufacturing sector.
Economists at UBS said in a research report on Wednesday that the U.S. economy is already in recession, albeit a mild one, as a weakening consumer sector has compounded the ongoing problems in the housing and credit markets.
The Philly Fed index will follow Friday's news that a key gauge of manufacturing in New York State posted its biggest monthly drop in February to the weakest since April 2003.
The New York Fed's "Empire State" index, one of the earliest monthly guideposts to U.S. factory conditions, slipped to minus 11.72 from plus 9.03 in January.
A weak report from the Philadelphia Federal Reserve could undermine the national picture of the manufacturing sector, which was teetering on the brink of contraction in January, according to the Institute for Supply Management.
The survey, to be released at 10 a.m. on Thursday, covers eastern Pennsylvania, southern New Jersey and Delaware.
The following is a selection of economists' comments:
BEAR STEARNS
Forecast: minus 10
"The Philadelphia Fed's manufacturing activity index plunged to -20.9 in January from -1.6 in December (and the details of the report corroborated the weakness in the headline index). Although other regional manufacturing indicators have also shown weakness recently (in contrast, the national ISM manufacturing index improved in January and manufactured production continues to point to growth, albeit slow growth), the degree of weakening in the Philadelphia Fed index in January seems exaggerated relative to other manufacturing data. We look, therefore, for a rise in the Philadelphia Fed index to -10.0 in February from -20.9 in January."
INSIGHT ECONOMICS
Forecast: minus 10
"The Philadelphia Fed Survey improved moderately in February but was still solidly stuck in contractionary territory. Domestic demand for manufactured goods has weakened significantly and most manufacturers are trimming inventories. The major source of strength in the factory sector is still coming from rising exports. Employment remained weak while price pressures eased slightly because of lower energy prices."
GOLDMAN SACHS
Forecast: N/A
"The Philadelphia Fed's business survey may show a bounce after the dismal reading in January; however, with the Empire index confirming that earlier move, we would not read too much into such an increase."
BNP PARIBAS
Forecast: minus 12
"After such sharp monthly declines, it is usual for headline indices to experience some gentle recovery. In line with the historical record, we therefore target an improvement in the headline business conditions index to around -12.0. But this should not disguise that this survey, alongside other key regional surveys, is strongly suggesting that full-blown recession has already arrived."
(Reporting by Burton Frierson; Editing by Andrea Ricci and James Dalgleish)
