Mid-Atlantic factory activity slips into contraction for the first time since May 2016

Paul Taggart | Bloomberg | Getty Images

An employee welds a specialized metal product in the shop at the Amuneal Manufacturing plant in Philadelphia, Pennsylvania.

U.S. Mid-Atlantic factory activity fell into contraction territory in February for the first time since May 2016, amid trade tension between China and the United States, Philadelphia Federal Reserve data released on Thursday showed.

The regional central bank said its business activity index deteriorated to -4.1 from 17.0 in January. The negative reading was well below economists’ forecast of 14.0, according to a Reuters poll. The decrease was the biggest monthly drop since August 2011.

“Manufacturing conditions in the region weakened this month,” the Philadelphia Fed said on the latest data.

Any reading below zero indicates contraction in the region’s manufacturing sector.

The Philadelphia Fed’s survey covers the manufacturing industries in eastern Pennsylvania, southern New Jersey and Delaware.

The survey’s component on news orders declined to -2.4, the lowest figure since May 2016, from 21.3 in January.

The monthly drop in regional new orders activity was the steepest since October 2008 during the height of the global credit crisis.

Mid-Atlantic shipment activity also sank into negative territory to -5.3 from 11.4 the month before.

On the other hand, the survey’s employment barometer rose to 14.5 from 9.6.

The six-month business condition index was steady at 31.3 compared with 31.2 in January, while the gauge on six-month capital expenditures was little changed at 31.7 versus 31.6.