Manufacturing in Philadelphia Area Grows at Fastest Pace Since April 2005
Manufacturing in the Philadelphia region expanded in December at the fastest pace since April 2005 as orders and the factory workweek increased.
The Federal Reserve Bank of Philadelphia’s general economic index unexpectedly rose to 24.3 from 22.5 last month. The gauge was forecast to decrease to 15, according to the median estimate in a Bloomberg News survey. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
Growth in China and other emerging economies, corporate purchases of new equipment and stronger consumer spending are bolstering production. Manufacturing may keep powering an economic recovery that Fed policy makers this week said has been slow to create jobs.
“It certainly adds to evidence that growth is accelerating,” said Jim O’Sullivan, global chief economist at MF Global Inc. in New York. “There is pretty good momentum going into the new year.”
Estimates in the Bloomberg survey of 59 economists ranged from 5 to 20.5.
Stocks were little changed after the manufacturing figures. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,235.36 at 10:39 a.m. in New York. Treasuries fell, pushing up the yield on the benchmark 10-year note to 3.54 percent from 3.53 percent late yesterday.
Another report from the Labor Department today showed fewer Americans than forecast filed claims for jobless benefits last week, a sign the labor market is improving. Applications for unemployment insurance dropped by 3,000 to 420,000.
The Philadelphia Fed bank’s new orders measure climbed to 14.6, the highest since February, from 10.4 in November. A measure of the average workweek increased to 19.3 in December, the highest since March 2004, indicating hiring may soon pick up.
The shipments gauge decreased to 7.3 from 16.8 last month. The employment index fell to 5.1 from 13.3 last month, which was the highest since August 2007.
The index of prices paid jumped to 51.2, the highest since July 2008, from 34 the prior month, while its gauge of prices received increased to a two-year high of 10.7 from minus 2.1.
The overall Philadelphia Fed’s index isn’t composed of the individual measures, so some economists consider it a gauge of sentiment among manufacturers. The New York Fed’s factory measure, released yesterday, rebounded to 10.6 this month from minus 11.1 in November.
Economists monitor the New York and Philadelphia 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 Jan. 3. The measure last month fell to 56.6 from a five-month high of 56.9.
Manufacturing makes up about 11 percent of the economy and is getting a boost from expanding world trade. Exports rose 3.2 percent in October to the highest level since August 2008, according to Commerce Department data released Dec. 10. Business spending on equipment and software advanced at a 17 percent annual rate in the third quarter.
Broadcom Corp., the biggest maker of chips for television set-top boxes, yesterday increased its fourth-quarter revenue projection to about $1.9 billion, the top end of an earlier forecast range. Irvine, California-based Broadcom is making inroads in the mobile-phone market, supplying radio chips for handsets from South Korea’s Samsung Electronics Co. and Finland’s Nokia Oyj.
“We have seen now an extended period of time of recovery in the components business,” Paul Reilly , chief financial officer of Arrow Electronics Inc., said yesterday at a conference in New York. Melville, New York-based Arrow is a distributor of electronic components and computer products to industrial customers.
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