Following on the heels of Tuesday's weaker than expected Empire Manufacturing report, today's Philly Fed also missed expectations by a wide margin. While economists were forecasting a headline reading of 8.0, the actual reading was -6.3. This is the lowest reading since February of 2013 and was the biggest miss relative to expectations since June 2012.
The table to the right breaks down February's Philly Fed report by each of the index's subcomponents. As shown in the table, just three (Delivery Time, Inventories, and Prices Received) of the nine components increased this month. Of the six components that declined, Shipments and New Orders saw the largest drops, which doesn't bode well in terms of economic strength. Once again, given the rough winter we have seen in the Philadelphia region, weather is being cited as the main culprit behind the weakness. Whether or not you agree that the weather argument has any merit, the reality is that until it warms up, investors seem willing to give the economy the benefit of the doubt. If you look at the forecast for the New York City area, it doesn't look like it is going to consistently warm up any time soon.