The Philadelphia region's services sector reading fell in January, Federal Reserve Bank of Philadelphia said on Tuesday.
The Philadelphia Fed’s non-manufacturing report on business conditions index fell to 1.0 in January from 7.7 in December. At the firm level, the diffusion index slumped to -3.9 in January from 6.4 in December.
Economists at IFR Markets had expected a reading of 10.0 for both indexes
“This is its first negative reading since October 2011; the index has fallen 41 points since November,” the Philadelphia Fed said of the firm level index. “Roughly similar percentages of firms reported increases in activity and decreases in activity; however, the share of firms reporting decreases has more than doubled since November.
At the company level, the new orders index fell 21 points to -3.1, its first negative reading since February 2013. The share of firms reporting increases in new orders at 23% fell below the 26% who are reporting decreases. The sales/revenues index fell 12 points to 3.9 in January. Almost 35% of the responding firms reported increases in sales/revenues, while 31% reported decreases. The regional activity index fell seven points to 1.0.
Looking ahead, the Fed said that the future activity indexes suggest that firms expect growth to continue over the next six months, although index readings are well below last year’s averages.
The diffusion index for future activity fell to 10.3 in January from a revised reading of 25.9 in December to 22.9 this month while the diffusion index for future activity at the firm level fell to 22.9 in January from a revised reading of 43.2 in December.
Almost 49% of the firms surveyed are expecting an increase in activity at their firms over the next six months, while the share of firms that expect a decline increased to 26% from 12% in December. Over 25% of the firms expect no change over the next six months. The future regional activity index fell 16 points to 10.3.
