Philadelphia-Area Manufacturing Beats Forecasts as Fed Index Rises to 10.2
Manufacturing in the Philadelphia region expanded in February at the fastest pace in four months as orders and sales picked up.
The Federal Reserve Bank of Philadelphia’s general economic index increased to 10.2, higher than projected, from 7.3 last month. Economists forecast the gauge would rise to 9, 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.
Production is poised to keep expanding as companies rebuild inventories and invest in new equipment. Faster job creation that helps drive bigger increases in consumer spending may further propel the industry.
“Manufacturing is still receiving good demand both domestically and from overseas,” David Semmens, a U.S. economist at Standard Chartered Bank in London, said before the report. “You’re seeing stronger demand in the automobiles sector and reasonable demand for high-end capital goods.”
Estimates from the 58 economists surveyed for the Philadelphia Fed index ranged from 7.5 to 12.5.
Stocks advanced, following a two-day decline in the Standard & Poor’s 500 Index, as reports showing a stronger economy outweighed concern about a Greek debt default. The S&P 500 rose 0.2 percent to 1,345.65 at 10:14 a.m. in New York.
Data today showed improvement in the labor and housing markets as well as consumer sentiment. First-time jobless claims unexpectedly declined 13,000 last week to 348,000, the fewest since March 2008, Labor Department figures showed. Housing starts climbed 1.5 percent to a 699,000 annual rate in January, the Commerce Department said.
Consumer confidence increased for a fourth straight week to reach the highest level in a year as more households believe the economy is improving, other figures showed.
The Bloomberg Consumer Comfort (COMFCOMF) Index rose to minus 39.8 in the period ended Feb. 14 from minus 41.7 the previous week. It marked just the third time since April 2008 that the gauge has climbed above minus 40, a reading consistent with recessions or their aftermath. The monthly expectations gauge climbed to minus 7 in February, also a 12-month high.
The Philadelphia Fed’s new orders measure rose to 11.7. the highest since April, from 6.9 in January, while the shipments gauge increased to 15, also a 10-month high, from 5.7 in January.
A measure of the average workweek jumped to 10.1 in February, the highest since April, from 5 in the prior month. The employment index decreased to 1.1, the lowest since August, from a reading last month of 11.6.
Individual measures in the index don’t contribute to the headline reading, so some economists consider it a gauge of sentiment among manufacturers.
Other measures indicate manufacturers are powering through the threat of weaker demand from Europe and China. Output at U.S. factories increased in January as automobile and business equipment production picked up, Federal Reserve figures showed yesterday.
New York-area manufacturing grew in February at the fastest pace since June 2010, according to the Federal Reserve Bank of New York’s so-called Empire State Index released yesterday.
Since November, “we’ve actually seen some improvements in backlogs,” Thomas Kadien, senior vice president of consumer packaging at International Paper Co., said on a Feb. 2 conference call. “For at least the last three weeks, we’ve felt very good about the demand. From a North American perspective, the softness is behind us, and we feel much better about the first quarter.”
Economists monitor Philadelphia and New York Fed factory reports for clues about the Institute for Supply Management national figures on manufacturing. The ISM will release its report on March 1.
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