Philadelphia Economic Index Unexpectedly Rises
By Alex Kowalski - Oct 20, 2011 10:11 AM ET .
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Manufacturing in the Philadelphia region unexpectedly expanded in October at the fastest pace in six months, a sign U.S. factories may provide more support for the recovery.
The Federal Reserve Bank of Philadelphia’s general economic index increased to 8.7 from minus 17.5 last month, the biggest one-month rebound in 31 years. Economists forecast minus 9.4 for the gauge, according to the median estimate in a Bloomberg News survey. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
Manufacturing may be picking up after companies put production plans on hold last month, when flagging financial markets and a rise in pessimism suggested slowing demand. Companies like Parker Hannifin Corp. (PH) have pointed to order gains, signaling the economy will avoid another recession.
“This is definitely a multispeed economy, and if you lump it all together it’s limping along, but manufacturing is a bright spot right now,” Robert Dye, chief economist at Comerica Inc. in Dallas, said before the report. “As long as auto sales hang in there, and if the consumer can hang in there even though we’ve seen very weak consumer confidence, then this economy won’t fall back into recession.”
Estimates for the manufacturing gauge from the 58 economists surveyed ranged from minus 16.5 to 1.
The report showed the Philadelphia Fed’s new orders measure climbed to 7.8, the highest since April, from minus 11.3 in September. The shipments gauge increased to 13.6 from minus 22.8 last month.
Price Measures
The index of prices paid decreased to 20 from 23.2 the prior month, while the measure of prices received dropped to minus 2.5 from 0.9.
The employment index in the Philadelphia Fed report decreased to 1.4 from a reading last month of 5.8. A measure of the average workweek rose to 3.1 in October from minus 13.7.
Individual measures in the index don’t contribute to the headline reading, so some economists consider it a gauge of sentiment among manufacturers.
Economists monitor Philadelphia and New York 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 Nov. 1.
New York-area manufacturing contracted at a faster pace than forecast in October, reflecting a lack of confidence in the recovery, according to the Federal Reserve Bank of New York’s so-called Empire State Index released earlier this week. Even so, the index’s measures of orders and sales improved.
European Demand
While regional manufacturing gauges waivered in August and September, other measures showed producers were weathering concern over Europe’s sovereign debt crisis and equity market volatility in the U.S. Factory output climbed in September for a third month, Fed figures show. Other reports showed U.S. exports and orders for capital goods held up in August.
Parker Hannifin, a maker of hydraulic equipment, this week increased its full-year forecast after posting higher sales and profit in the third quarter from a year earlier. On top of a gain in North American industrial orders, strong business in Europe helped ease the Cleveland-based company’s concerns the global economy might retrench, the company said.
“If we haven’t talked ourselves into a double-dip by now, we probably won’t because we’ve been talking about it for a better part of two quarters here,” President and Chief Executive Officer Donald Washkewicz said in an Oct. 18 call with analyst, noting that Parker Hannifin’s outlook was “bullish.” “All of the major countries, being Germany, France, U.K., Italy, are all looking good. That’s the reason we’re pretty optimistic about Europe going forward.”
To contact the reporter on this story: Alex Kowalski in Washington at
akowalski13@bloomberg.net