US DATA: Soft Philly Non-Manufacturing Activity/Prices Not Clear National Signal

The Philadelphia Fed's non-manufacturing regional business activity diffusion index fell to a 5-month low of -9.1 in January, from -3.4 prior (rev from -6.0). The Philadelphia Fed characterizes the implied activity as "soft" (in December it was described as "weak"), with the current general activity index dipping to 2.2 from 4.6 prior.

• The internals were mixed: new orders rose to 1.6 from -4.6, but sales were down to 2.6 from 3.2, full-time employment down to 1.5 from 3.2. Prices paid fell 2 points to 28.9 while prices received fell to -0.3 from 23.3.
• The latter comes after spiking 21+ points in December (after similar fluctuations between September and November), so it is hard to discern much signal here especially as the Philly manufacturing equivalent spiked in January, but some will see this as notable as the weakest since June 2023.
• The report maintains the theme of weakening regional services sector activity in recent months, though contrasts significantly from the prior two months in that the spike in forward expectations has reversed.
• The regional business activity expectations 6-months forward fell to 26.2 after averaging above 46 in Nov/Dec (29.8 in Oct), with firm-level business activity expectations showing a similar pattern. This is still elevated overall, though.
• Looking at the broader trends, current activity looks fairly flat over the last 2-plus years, when ignoring the large swings in a series that is volatile month-to-month.
• That's consistent with a softening rather than resurgent services sector, but this is looking increasingly like a regional than a national phenomenon, with ISM Services and Services PMI showing increasingly expansionary conditions in the last couple of months.