Philadelphia-Area Manufacturing Slows More Than Estimated as Orders Drop
April 20 (Bloomberg) -- Steven Wieting, managing director of economic and market analysis at Citigroup Global Markets Inc., talks about the outlook for the U.S. economy and corporate profits. Wieting, speaking with Tom Keene on Bloomberg Television's "Surveillance Midday," also discusses the federal budget deficit and U.S. debt. (Source: Bloomberg)
Manufacturing in the Philadelphia region slowed more than forecast in April as measures of orders and sales fell.
The Federal Reserve Bank of Philadelphia’s general economic index dropped to 18.5, the lowest level since November, from 43.4 the prior month which was the highest level since 1984. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
Rising energy prices and supply-chain disruptions at auto producers like Ford Motor Co. (F) following last month’s earthquake and tsunami in Japan may slow manufacturing in coming months. Nonetheless, growing exports to emerging economies like China and inventory rebuilding will continue to drive the factory expansion that is leading the recovery.
“There’s some loss of momentum in manufacturing, partly due to a temporary loss of production related to the shortage of parts” coming out of Japan, said Jim O’Sullivan, chief economist at MF Global Inc. in New York. “The weight of evidence still points to pretty solid growth at factories.”
Economists surveyed by Bloomberg forecast the index would fall to 36.9, according to the median estimate of 56 economists surveyed by Bloomberg News. Estimates ranged from 28 to 43.8.
Other Reports
Other reports today showed consumer confidence rose last week for a fourth consecutive time, more Americans than projected filed claims for jobless benefits and the index of leading economic indicators climbed last month.
Stocks rose, propelled by better-than-estimated earnings at Apple Inc. and Morgan Stanley. The Standard & Poor’s 500 Index increased 0.3 percent to 1,334.3 at 10:42 a.m. in New York.
The Philadelphia Fed’s new orders measure decreased to 18.8 from 40.3 in March which was the highest since November 1983. The shipments gauge fell to 29.1 from 34.9.
The employment index in the Philadelphia Fed report dropped to 12.3 in April from 18.2 in March. A measure of the average workweek increased to 17.7 from 13.2.
The index of prices paid decreased to 57.1 from 63.8 the prior month, while the measure of prices received climbed to 27.5, the highest level since June 2008, from 22.6.
The Philadelphia report runs counter to figures from the Federal Reserve Bank of New York last week showing manufacturing in that region accelerated in April as gauges of orders, sales and employment improved. The bank’s general economic index rose to a one-year high of 21.7 from 17.5 in March.
Sentiment Measure
Individual measures in the Philadelphia index don’t contribute to the headline reading, so some economists consider it a gauge of sentiment among manufacturers.
Economists monitor the Philadelphia and New York Fed factory reports for clues about the Institute for Supply Management national figures on manufacturing during the month. The ISM will release its report on May 2.
Overseas demand for American goods is helping support U.S. manufacturing, which makes up about 11 percent of the economy. Factories boosted payrolls by 17,000 workers in March following a gain of 32,000 the prior month, according to Labor Department data on April 1.
The auto industry is slowing output. Toyota Motor Corp. last week told U.S. dealers that assembly disruptions triggered by last month’s record earthquake and tsunami in Japan may thin supplies of vehicles into the third quarter.
The world’s largest automaker will build vehicles at “significantly reduced levels,” Bob Carter , group vice president of U.S. sales, said in a memorandum to dealers. “The potential exists that supply of new vehicles could be significantly impacted this summer.”
Japan’s influence
Ford Motor Co., the second-largest U.S. automaker, closed a factory in Kentucky this month due to earthquake-related parts shortages.
Other manufacturers, particularly of computer equipment, continue to profit from foreign demand.
Intel Corp. (INTC) and International Business Machines Corp. (IBM) yesterday issued sales and profit forecasts that reflected demand from companies eager to upgrade computer systems left fallow during the recession.
IBM, the largest computer-services provider, boosted its full-year profit forecast, while Intel, the top chipmaker, forecast second-quarter sales higher than analysts predicted.
To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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