Manufacturing in Philadelphia Fed Area Cooled in JulyBob Willis
Manufacturing in the Philadelphia region cooled in July as orders fell for the first time in a year, signaling the expansion is slowing.
The Federal Reserve Bank of Philadelphia’s general economic index fell to 5.1 this month, the lowest level since August 2009, from 8 in June. Readings above zero signal growth in the regional gauge, which covers eastern Pennsylvania, southern New Jersey and Delaware. The bank’s orders gauge turned negative for the first time in 12 months.
Manufacturing may moderate as companies are less pressed to rebuild inventories and the recovery shows signs of slackening. The results corroborate the New York Fed survey released earlier today that showed factories in that region expanded at the slowest pace this year.
“Manufacturing has peaked and factory output will moderate over the next few months,” Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “With the biggest boost from the inventory adjustment now behind us, a downshift in factory output was unavoidable, particularly considering domestic demand has failed to improve appreciably over the past few months.”
Economists forecast the measure would rise to 10, according to the median projection in a Bloomberg News survey. Estimates of 52 economists polled ranged from 4.1 to 18.
The figures follow a report from the Fed Bank of New York that showed its general economic index fell to 5.1 in July, the lowest level this year, from 19.6 the prior month.
Another report from the Fed showed industrial production rose 0.1 percent in June, boosted by utility output, while manufacturing declined 0.4 percent.
Stocks extended earlier losses after the Philadelphia report confirmed manufacturing was cooling. The Standard & Poor’s 500 Index fell 1.3 percent to 1,081.13 at 10:21 a.m. in New York. Treasury securities climbed, sending the yield on the benchmark 10-year note down to 2.99 percent from 3.04 percent late yesterday.
The Philadelphia Fed bank’s shipments gauge fell to 4 from 14.2 in June. The new orders measure dropped to minus 4.3 from 9.
The employment index climbed to 4 from minus 1.5. Factories nationally have added 136,000 workers to their payrolls this year, according to Labor Department data.
The Philadelphia Fed’s index of prices paid increased to 13.1 from 10 in June. Prices received declined to minus 8.4 from minus 6.5.
The inventory index was little changed at 4.5 compared with 4.6, signaling factories are adding to stockpiles.
The overall Philadelphia Fed index isn’t composed of the individual measures, so some economists consider it a gauge of sentiment among manufacturers.
Economists monitor the New York and Philadelphia Fed factory reports for clues about the Institute for Supply Management figures on U.S. manufacturing during the month. The July data will be released August 2.
The ISM’s manufacturing gauge fell in June for a second month after reaching in April the highest level in almost six years.
Trade is helping spearhead the factory rebound. U.S. exports have risen 11 of the 13 months through May, boosted by surging growth in emerging Asian and Latin American countries, according to figures from the Commerce Department.
Honeywell International Inc. last week won a contract valued at more than $3 billion to supply brakes and other parts for China’s first narrow-body passenger jet, the company’s second award for the aircraft program.
Morris Township, New Jersey-based Honeywell, which describes China as the “third pillar” of the global aviation market, is competing for two more contracts for the C919, Karen Crabtree, a spokeswoman for Honeywell’s aerospace division, said by phone.
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