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Factories in Philadelphia Fed Region Rise at Faster Pace

An employee works on assembly of the M88 Hercules heavy recovery vehicle on the production line at the BAE Systems Plc Land & Armaments facility in York on May 23, 2013. Photographer: Andrew Harrer/Bloomberg
An employee works on assembly of the M88 Hercules heavy recovery vehicle on the production line at the BAE Systems Plc Land & Armaments facility in York on May 23, 2013. Photographer: Andrew Harrer/Bloomberg

Manufacturing in the Philadelphia region unexpectedly grew in June at the fastest pace in two years as factories showed resilience in the face of slowing overseas markets.

The Federal Reserve Bank of Philadelphia’s general economic index climbed to 12.5, exceeding all forecasts in a Bloomberg survey and the highest since April 2011, from minus 5.2 in May. Readings greater than zero signal expansion in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware.

The data corroborate figures earlier this week showing improved sentiment at factories in the New York Fed region even as global growth cools. In the U.S., a pickup in auto and home sales, combined with the diminishing effects of this year’s across-the-board federal spending cuts, may prompt businesses to boost spending and lift production.

“Once we get a little more clarity on the global growth picture, it might be easier for manufacturers to start ramping up a little bit,” Gennadiy Goldberg, U.S. strategist at TD Securities Inc. in New York, said before the report. “Over the next couple months you should start seeing a little more stabilization. It should start to improve later in the year.”

Economists forecast the gauge would improve to minus 2, according to the median estimate in a Bloomberg survey. Estimates ranged from minus 8 to 5.

Other Data

Other reports today showed sales of existing houses climbed more than forecast in May, claims for jobless benefits rose more than projected last week and consumer confidence improved.

Philadelphia-area manufacturers grew more optimistic about the future, today’s report showed. The outlook index for six months from now climbed to 33.7, the highest since September, from 32.3 in May.

The new orders measure jumped to 16.6, a two-year high, from minus 7.9 in May. A gauge of employment showed factories were cutting staff at a slower pace, improving to minus 5.4 from minus 8.7 in May.

The gauge of prices paid climbed to 22.5 after 6.9 in May. An index of prices received rose to 14.6 from minus 3.3.

Economists monitor Philadelphia and Empire State factory reports for clues about the Institute for Supply Management national figures on manufacturing, which makes about 12 percent of the economy. This month, the Federal Reserve Bank of New York’s general economic index climbed to 7.8, the highest reading since March, from minus 1.4 in May.

Manufacturing Nationally

The ISM, which will release its next report July 1, reported that manufacturing contracted in May at the fastest pace in four years, with the index falling to 49, the lowest reading since June 2009.

Home construction and an improving economy are giving a lift to auto manufacturers, which are seeing an increase in U.S. sales of trucks and vans.

General Motors Co. will begin marketing a redesigned line of pickups this year. Ford Motor Corp., Chrysler Group LLC and Daimler AG are introducing fuel-efficient work vans to the U.S. market in response to a rebound in residential construction.

“If people buy houses, somebody’s got to build them and the people who build them need materials, so someone’s got to take the material to the construction site,” said Claus Tritt, who heads Daimler’s U.S. commercial-van business. “It’s almost like a circle of life.”

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