FXstreet.com (Barcelona) - Manufacturing activity un the Plhiladelphia Fed area seems to have sank even lower in February, after having fallen significantly in January, according to the latest report by the Federal Reserve of Philadelphia.

The index for current activity dropped to -24.0 points in January from -20.9 points in December, with 40% of the companies reporting that activity remained unchanged on the month, nevertheless 42% of the companies reported decreases, a percentage sharply higher than the 18% of January.

Demand for manufactured goods increased somewhat but yet in negative figures, as the new orders index rose to -10.9 from -15.2 in January

The outlook for the area's manufacturing sector does not look much better, as the future general activity index declined from 5.2 in January to -16.9, its first negative reading since January 2001. The employment index increased to 2.5 in February from -1.5 in January.

The level of the index, according to Ian Shepherdson, Chief U.S. Economist at High Frequency Economics, Ltd, gives hints of a deep recession: The headline index is now consistent with a deep recession, if sustained at this level, but note that the key subindex, new orders, is less bad, having risen to -10.9 from -15.2.

The focus is no won the ISM to assess whether the Philly weakness is reflected in the national ISM : This is still consistent with recession-level ISM new orders (42 or so) but it is not as disastrous as the headline. The key question now is whether the Philly weakness will be reflected in the national ISM. That didn't happen last month, but the gap between them is now so enormous that something surely has to give.