Factories robust as jobless claims up http://www.reuters.com/article/economicNews/idUSN2136402020070621?sp=true
Thu Jun 21, 2007
By Burton Frierson
NEW YORK (Reuters) - Manufacturing in the U.S. Mid-Atlantic region unexpectedly grew at its fastest rate in two years in June, suggesting a surprisingly strong recovery in the national factory sector, data showed on Thursday.
The Philadelphia Federal Reserve Bank said its business activity index jumped to 18.0 in June, its highest since April 2005 and up from 4.2 in May. Economists polled by Reuters had forecast a more modest rise to 7.0. Any reading above zero indicates growth in the region's manufacturing. The index has been above zero for six straight months, but survey's main gauge of price pressures moderated.
Reaction in financial markets was fairly mild and some analysts wondered whether this signaled a lasting expansion in manufacturing or a more temporary boost.
Stocks initially pared their losses but failed to derive lasting benefit. The dollar firmed on the data. Prices of government bonds, which benefit from signs of weakening economic growth, slipped.
"Manufacturers are replenishing inventories to get ready for the fall," said Carl Kaufman, portfolio manager at Osterweis Capital Management in San Francisco.
"That's why we are going to see faster growth in the second half than the first half of the year, but this may cause another inventory bubble at the end of the year."
The new orders index, a gauge of future growth, surged to 18.3 in June from 8.7 in May. However, the six-month business conditions outlook declined to 16.7 in June from 30.8 in May.
The prices paid index eased to 29.7 from 32.3 in May, but the overall inflationary outlook appeared mixed. "Firms continued to report higher input costs, but price increases for finished manufactured goods are not widespread," the survey said.
The survey covers factories in a region encompassing eastern Pennsylvania, southern New Jersey and Delaware and is looked at closely as one of the first indicators of the health of the U.S. manufacturing sector.
The report followed data released earlier in the day showing the number of U.S. workers filing initial claims for jobless aid rose last week, suggesting some softening in the U.S. labor market.
Applications for state unemployment insurance benefits rose 324,000 in the week ended June 16 from a revised 314,000 the previous week. Wall Street analysts had forecast claims at 312,000.
Still, a forward-looking economic gauge released later in the morning pointed to a pick-up in growth. The Conference Board, a private research firm, said its index of leading economic indicators rose 0.3 percent in May, suggesting the economy will strengthen through the summer and into the fall.
(Additional reporting by Ellen Freilich and Chris Reese in New York, Nancy Waitz in Washington)
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