Reflecting the disruptive effects of Hurricane Sandy, the Federal Reserve Bank of Philadelphia released a report Thursday morning showing an unexpected contraction in regional manufacturing activity in the month of November.
The Philly Fed said its diffusion index of current activity plunged to a negative 10.7 in November from a positive 5.7 in October, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to edge down to a positive 4.5.
With the much steeper than expected drop, the Philly Fed index fell to its lowest level since coming in at a negative 12.9 in July.
However, the Philly Fed noted, "The influence of the recent storm in terms of lost production in the short run and reduced activity for longer periods was evident in firms' responses to questions about the storm's impact on business activity."
The report showed that the new orders index fell to a negative 4.6 in November from a negative 0.6 in October, indicating a faster rate of contraction in new orders.
The shipments index also slid to a negative 6.7 in November from a negative 0.2 in October, while the inventories index plummeted to a negative 12.5 from a positive 2.1.
On the other hand, the number of employees index climbed to a negative 6.8 in November from a negative 10.7 in October. Despite the increase, however, the index remained negative for the fifth straight month.
The report also showed that the prices paid index jumped to 27.9 in November from 19.0 in October, while the prices received index edged up to 6.3 from 5.4.
Looking ahead, the Philly Fed said most of the survey's future indicators suggest modest optimism among the reporting manufacturers.
While the future general activity index dipped to 20.0 in November from 21.6 in October, the percentage of firms expecting increases in activity over the next six months still exceeded the percentage expecting decreases by a significant margin.
Noting the impact of the storm, Peter Boockvar, managing director at Miller Tabak, said, "We're going to somehow have to carve out the business activity in the Northeast of late in order to get an accurate pulse of the state of the rest of the national economy."
The New York Federal Reserve released a separate report earlier in the day showing a continued contraction in New York manufacturing activity.
The report said the general business conditions index rose to a negative 5.2 in November from a negative 6.2 in October, with the index remaining negative for the fourth straight month.
However, the New York Fed noted that 100 percent of firms in the New York City area reported some reduction in activity as a result of Hurricane Sandy.
by RTT Staff Writer
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