Manufacturing in the Philadelphia region expanded more than projected in October, a sign factories are sustaining the momentum gained prior to the partial federal shutdown that ended today.
The Federal Reserve Bank of Philadelphia’s general economic index fell to 19.8 this month from a more than two-year high of 22.3 in September. Readings greater than zero signal growth in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 56 economists surveyed by Bloomberg called for a reading of 15.
While uncertainty stemming from budget and debt ceiling debates in Washington have undermined buyer confidence, auto sales and consumer demand for home-related goods are keeping factories busy. Rising home and stock prices have given household balance sheets a boost and, combined with improvement in overseas markets, could help propel manufacturing, which accounts for about 12 percent of the economy.
“Equity and housing markets are improving, and even the export numbers have improved in recent months,” Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York, said before the report. “Prior to this turmoil, it looked like manufacturing was accelerating, and I think once we get through this that will still be the trend.”
Economists’ estimates in the Bloomberg survey ranged from minus 2.0 to 27.5. The September reading was the highest since March 2011.
A report from the Federal Reserve Bank of New York on Oct. 15 showed manufacturing in that region slowed in October as sales and hiring cooled. That bank’s general economic index fell to 1.5, a five-month low, from 6.3 in September.
Other reports today showed jobless claims fell less than forecast last week, and consumer confidence tumbled.
Jobless claims decreased by 15,000 to 358,000 in the week ended Oct. 12 from a revised 373,000 in the prior period, according to Labor Department figures. California continued to work through a backlog of applications, a Labor Department Spokesman said, indicating it will take time to gauge the impact of the federal shutdown.
Americans in October were the most pessimistic about the nation’s economic prospects in almost two years as concern mounted that continued political gridlock will hurt the expansion, according to the Bloomberg Consumer Comfort Index.
The report’s monthly expectations gauge plunged to minus 31, the lowest level since November 2011, from minus 9 in September, a report showed today. The share of people projecting the economy will worsen jumped by the most since the collapse of Lehman Brothers Holdings Inc. five years ago. The weekly measure of current conditions fell to minus 34.1 in the period ended Oct. 13, the weakest since March.
The Philadelphia Fed’s new orders measure increased to 27.5, the highest level since March 2011, from 21.2 the prior month. An index of shipments declined to 20.4 in October from 21.2 in September. A gauge of employment climbed to 15.4 this month, the highest since May 2011, from 10.3 last month.
Philadelphia-area manufacturers were the most optimistic about the future in 10 years, today’s report showed. The outlook index for six months from now increased to 60.8, the highest since September 2003, from 58.2 last month.
Economists monitor Philadelphia and Empire State factory reports for clues about the Institute for Supply Management national figures on manufacturing. The next ISM report is due Nov. 1.