Manufacturing firms in the Philadelphia area continued to report weak business conditions in July, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of regional manufacturing activity stuck in negative territory for the third straight month.
While the Philly Fed said its diffusion index of current activity rose to a negative 12.9 in July from a negative 16.6 in June, a negative reading points to a continued contraction in manufacturing activity. Economists had been expecting the index to climb to a negative 8.0.
The headline index pointed to continued weakness in regional manufacturing activity, but Paul Ashworth, Chief U.S. Economist at Capital Economics, noted that the details of the report were more encouraging.
The new orders index rebounded to a negative 6.9 in July from a negative 18.8 in June, while the shipments climbed to a negative 8.6 from a negative 16.6.
The unfilled orders index also rose to a negative 9.5 in July from a negative 16.3 in June, although the negative readings continue to point to a contraction.
Meanwhile, the report showed that the number of employees index tumbled to a negative 8.4 in July from a positive 1.8 in June, pointing to a drop in employment.
Yesterday's Beige Book report from the Federal Reserve said manufacturing continued to expand in most districts but noted that Philadelphia reported declines in shipments and orders.
"So, the anecdotal evidence suggests that Philly area manufacturers are suffering more than those in most of the rest of the country," Ashworth said.
He added, "Overall, U.S. manufacturers are clearly being affected by the recession in Europe and the slowdown in Asia, but the downturn doesn't appear to be quite as bad as this Philly Fed survey suggests."
On the inflation front, the report showed that the prices paid index climbed to a positive 3.7 in July from a negative 2.8 in June, while the prices received index rose to a positive 1.6 from a negative 6.9.
The Philly Fed also said its future general activity index edged down to 19.3 in July from 19.5 in June, although a positive reading still points to expectations for an increase in activity over the next six months.
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