Philadelphia-area manufacturers reported increased business activity in the month of July, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of regional manufacturing activity reaching a two-year high.
The Philly Fed said its diffusion index of current activity surged up to 19.8 in July from 12.5 in June, with a positive reading indicating an increase in regional manufacturing activity. The increase came as a surprise to economists, who had expected the index to drop to a reading of 9.0.
With the unexpected increase, the Philly Fed index reached its highest level since jumping to 36.1 in March of 2011.
A notable acceleration in the pace of shipment growth contributed to the increase by the headline index, with the shipments index climbing to 14.3 in July from 4.1 in June.
The number of employees index also jumped to a positive 7.7 in July from a negative 5.4 in June, signifying a notable improvement in labor market conditions.
Meanwhile, the report showed that the new orders index dipped to 10.2 in July from 16.6 in June, indicating a slowdown in the pace of growth in new orders.
Firms also reported a drawdown of inventories, with the inventories index tumbling to a negative 21.6 in July from a negative 6.6 in the previous month.
The prices paid index also edged down to 21.5 in July from 22.5 in June, while the prices received index slid to 7.0 from 14.6.
Looking ahead, the Philly Fed said the survey's future indicators suggest improved optimism among the reporting manufacturers.
The future activity index jumped to 44.9 in July from 33.7 in June, reaching its highest level since hitting 56.1 in March of 2011.
Jennifer Lee, senior economist at BMO Capital, said, "July is looking better for manufacturers in a couple of regions."
On Monday, the New York Federal Reserve released a separate report showing that conditions for New York manufacturers have continued to improve modestly in July.
The New York Fed said its general business conditions index rose to 9.5 in July from 7.8 in June, while economists had been expecting the index to drop to 5.0.
With the unexpected increase, the general business conditions index reached its highest level since hitting 10.0 in February.
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