Just in case the economic data appeared to be coming in as too hot in recent days, today's two key regional Fed manufacturing indicators sent conflicting signals, with the New York Fed survey sliding from 17.70 to 13.1, and missing expectations of 17.50, while the Philadelphia Fed rose from 22.2 to 25.8, beating exp. of a dip to 21.6

The commentary from both regional Feds was optimistic, although NY conceded a slowdown in January:

Business activity continued to expand in New York State, according to firms responding to the February 2018 Empire State Manufacturing Survey. The headline general business conditions index fell five points to 13.1, suggesting a somewhat slower pace of growth than in January.

The New York internals, however, were good, especially when it comes to labor: number of employees rose to 10.9 vs 3.8, while work hours rose to 4.6 vs 0.8. Meanwhile, inventory fell to 4.9 vs 13.8. Unlike current conditions, optimism rose with six-month general business conditions up to 50.5 vs 48.6. A potential bottleneck was noted in future delivery times at a record high in Feb, up from 10.9 to 15.3

The Philly Fed meanwhile was stronger across the board:  

Results from the Manufacturing Business Outlook Survey suggest that the region’s manufacturing sector continues to expand in February. The indexes for general activity, new orders, and employment were all positive this month and increased from their readings last month. Price increases for inputs were more widespread this month, according to the respondents. The survey’s future indexes, reflecting expectations for the next six months, suggest continued optimism.

Here, too, the internals were strong:

  • New orders rose to 24.5 vs 10.1
  • Employment rose to 25.2 vs 16.8
  • Unfilled orders rose to 14.5 vs -1.8
  • Shipments fell to 15.5 vs 30.3
  • Delivery time fell to 4.5 vs 6.1

There were some declines:

  • Inventories fell to -0.9 vs 9.4
  • Prices received fell to 23.9 vs 25.1
  • Average workweek fell to 13.7 vs 16.7

But the biggest surprise for both regional Feds was the blistering surge in the Prices Paid index, the clearest indicator of input cost inflation, which in the New York Fed surged from 36.2, to 48.6, the highest in six years, while according to the Philly Fed, "cost pressures were more widespread this month among the reporting manufacturers: The prices paid index increased 12 points to 45.0, its highest reading since May 2011" or in nearly 7 years.

As a reminder, these surveys are among the closest reading of the economy the Fed has at its disposal when making rate hike decisions, so based on just today's Prices Paid data, it may be time to guarantee at least 4 rates hikes in 2018.