The Philly Fed index retreated to 18.1 in February from an elevated 44.3 in January but remained well above its contractionary minus 10.9 in December, and showed continued moderate expansion. Expectations for February called for moderate growth at 22.7.

The Philadelphia Fed noted that key subindexes including new orders and shipments, while lower, remain elevated, and the overall index remains well above its long-term average.

The new orders index dropped 21 points to 21.9, and the shipments index fell to 26.3 from 41.0. Employment declined 7 points to 5.3, giving back its increase last month. Average workweek index fell to 2.9 from 20.5.

Prices paid jumped to 40.5, its highest reading since October 2022, from 31.9. Prices received rose to 32.9, highest since November 2022, versus 29.7.

Was it dry January? The Philly index caught everyone off guard with an amazing jump to 44.3 in January from minus 10.9 in December. The call for February looks for still-strong growth at 22.7.

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.