The Federal Reserve Bank of Philadelphia said Thursday that its index of regional factory activity fell to 5.2 this month from 6.3 in January. Any figure above zero indicates expansion.
"The dip in the Philly Fed manufacturing index," said Paul Ashworth, chief U.S. economist at Capital Economics, "adds to the evidence that the stronger dollar and weak overseas demand is holding back the factory sector."
Coupled with other recent reports, the survey suggests U.S. manufacturers are barely growing at the start of 2015. The Fed reported on Wednesday that factory production nationwide edged up just 0.2 per cent in January after a flat reading on Wednesday. Computer, clothing and steel production increased, offsetting the declines in the auto and aerospace categories, the Fed said.
Meanwhile, a separate survey Tuesday from the New York Fed found that the pace of factory growth was also slipping in February.
Two major forces are dragging down factory output. A broader economic slowdown worldwide has cut into demand for exports, while also causing the value of the dollar to levels that make U.S.-made goods less competitive overseas. Plunging oil prices since last June have also led U.S. oil and gas drillers to order less drilling equipment and machinery.
The Philly Fed index has tumbled for three straight months, after reaching the highest point in more than two decades in November. Still, most Philly-area factories expect strong demand over the next six months. The survey covers manufacturing in eastern Pennsylvania, southern New Jersey and Delaware.