Manufacturing in Philadelphia Area Unexpectedly Expands
Manufacturing in the Philadelphia region unexpectedly expanded in December to an eight-month high, reflecting pickups in sales and orders that signal the industry is starting to stabilize.
The Federal Reserve Bank of Philadelphia’s general economic index rose to 8.1, from minus 10.7 in November. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 61 economists surveyed by Bloomberg was for an improvement to minus 3 after superstorm Sandy curtailed activity a month earlier.
The report, which contrasts with data showing New York-area manufacturing shrank for the fifth straight month, indicates the industry is holding up as households maintain their purchases. At the same time, uncertainty about tax increases and government spending cuts slated for early 2013 are limiting investment.
“There’s a rebound from the Sandy effect, which depressed the November number,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who projected reading of 5.2 for the index. “Things are still hanging in there. We’re looking at moderate growth in manufacturing.”
Bloomberg survey estimates ranged from minus 12.4 to 15.
Other reports today showed existing-home sales reached a three-year high, the economy grew more than previously reported, and applications for jobless benefits rose.
Sales of previously owned homes climbed more than forecast in November as cheaper borrowing costs sustained the housing rebound. Purchases increased 5.9 percent to a 5.04 million annual rate, the fastest since November 2009, the National Association of Realtors said today.
Gross domestic product expanded at a 3.1 percent annual rate in the third quarter, reflecting the first gain in state and local government spending in three years, more consumer purchases and a smaller trade gap, according to Commerce Department figures.
The number of Americans filing first-time claims for unemployment insurance payments climbed to 361,000 in the week ended Dec. 15, the Labor Department reported.
Stocks maintained gains after the figures, with the Standard & Poor’s 500 Index climbing 0.1 percent to 1,436.93 at 10:26 a.m. in New York.
The Philadelphia Fed’s new orders measure jumped to 10.7, the highest since February, from minus 4.6 the prior month, and the shipments gauge increased to 18.3, the strongest reading since April 2011, from minus 6.7. Its inventory index improved to minus 11.5 from minus 12.5.
The employment index climbed to 3.6 from minus 6.8.
The index of prices paid was little changed at 27.8 after 27.9 the prior month, while a gauge of prices received increased to 15.4 from 6.3.
Manufacturers were also more optimistic about the prospects for future business, with the six-month outlook for orders climbing to 30.9 from 20.
The Philadelphia Fed’s overall index isn’t composed of the individual measures, one reason some economists consider it a gauge of sentiment among factory managers. Manufacturing makes up about 12 percent of the economy.
Economists monitor the New York and Philadelphia Fed factory reports for clues about the Institute for Supply Management’s national figures on manufacturing. The ISM report is due on Jan. 2.
Figures from the New York Fed on Dec. 17 showed the so- called Empire State index fell to minus 8.1 this month, from minus 5.2 in November.
A cross-industry survey by the Business Roundtable found more corporate leaders see a slump. About 23 percent of members surveyed said their company’s spending will fall in the next six months, compared with 19 percent in the prior quarter, the Washington-based CEO association said on Dec. 12.
“The continued softness in quarterly sentiment reflects deep uncertainty about the future overall economic climate, realities of a slow-growing economy and frustration over Washington’s inability to resolve looming ‘fiscal cliff’ issues,” Jim McNerney, chairman of the group and chief executive officer of Boeing Co., said in a statement.
In one sign manufacturing is regaining its footing at the national level, a Federal Reserve report last week showed industrial production jumped in November by the most in two years as businesses began to rebound from the damage inflicted by superstorm Sandy.
The automobile industry remains a source of growth. Cars and light trucks sold at a 15.5 million annual rate in November, the most since February 2008, boosted in part by buyers replacing cars damaged by the storm, according to data from Ward’s Automotive Group.
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