Six straight in the negative column and the deepest yet at minus 24.3 for February, the Philadelphia Fed's sample continues to signal contraction ahead for the Mid-Atlantic manufacturing sector, and by extension, the national sector as well.

Details of the report are no less ominous than the headline index: new orders at minus 13.6 for their seventh straight month under zero and unfilled orders at minus 17.0 for a ninth straight month in contraction. The sample has been working down unfilled orders to keep shipments moving, at plus 8.7 in February, but the well must be running dry. Employment has also remained in the plus column, at 5.1 as the sample isn't yet ready to scale down their staffs.

The six-month outlook isn't particularly upbeat to say the least, at 1.7 for a reading that in normal times runs in the 30s and 40s if not higher. The lack of optimism is no doubt tied to lack of improvement in input costs, at 26.5 for a 2-point increase from January. Yet inflation pressures have generally been easing with costs down from the 40 and 50 zone no more than 6 months ago; selling prices are clearly rising at a slower clip, at only 14.9 in February which is half of January's rate and, in what is really the only good news in this report, the lowest reading since early on in the pandemic in July 2020.

The Philadelphia Fed's index isn't the only manufacturing survey underwater. Empire State came in at minus 5.8 in February earlier in the week for its sixth negative reading in seven months. January readings for the Richmond Fed, the Kansas City Fed, and the Dallas Fed were also in the contraction column as has the ISM manufacturing report for the last three reports. Definitive data, by contrast, have been holding above water, but it would be no surprise if durable goods orders or factory orders or industrial production all begin to submerge.

The Philadelphia Fed manufacturing index has been in a long run of contraction though January's report did show some positives including strength in employment, easing in inflation, and improvement in confidence. After January's minus 8.9, forecasters see February at minus 7.2.

The general conditions index from this business outlook survey is a diffusion index of manufacturing conditions within the Philadelphia Federal Reserve district. This survey, widely followed as an indicator of manufacturing sector trends, is correlated with the ISM manufacturing index and the index of industrial production.

Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. By tracking economic data such as the Philly Fed survey, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth so that it won't lead to inflation. The Philly Fed survey gives a detailed look at the manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on market behavior. Some of the Philly Fed sub-indexes also provide insight on commodity prices and other clues on inflation. The bond market is highly sensitive to this report because it is released early in the month and is available before other important indicators.