Some data points:
Leading Indicators Suggest Growth
Mid-Atlantic Manufacturing Accelerates
By MICHAEL S. DERBY and BRIAN BLACKSTONE
June 21, 2007 2:07 p.m.
The economy appears poised for modest but continued growth over the summer months, according to a report Thursday.
Private research group the Conference Board said that its index of leading indicators rose by 0.3% to a reading of 138.0 in May, from the revised 0.3% decline seen the month before. May's reading matched the consensus expectation of forecasters.
"These data may be suggesting that the economy has weathered the negative impact of the housing slump and the spring run up in gas prices," said Ken Goldstein, economists with the research group.
The Conference Board also reported that its index of coincident economic indicators rose by 0.2% to 124.0, after April's 0.1% increase, while the index of lagging indicators also increased by 0.2% in May to 128.6, following the same increase the month before.
In the report, five of the 10 components making up the leading index rose last month, led by weekly unemployment insurance claims and stock prices. The biggest negatives were money supply and average weekly manufacturing hours, followed by interest rate spreads.
Philly Fed Report Shows Manufacturing Growth
Mid-Atlantic region manufacturers saw in June their best rate of growth since April 2005, even as they continued to face pressure on the inflation front.
A report from the Federal Reserve Bank of Philadelphia on Thursday said the bank's business conditions index, which gauges activity in the region's manufacturing sector, moved to an 18.0 reading in June, from 4.2 in May and 0.2 in April. In the overall index and in its components, positive numbers indicate expanding activity and describe the breadth, but not the magnitude, of the change. June's reading came in above the 7.0 that was the consensus view of forecasters.
"Indicators for current activity point to an expansion of the region's manufacturing sector, after modest growth in previous months," the report said. "A large share of firms continued to report cost pressures, but only slightly more firms reported higher prices for their own manufactured goods than reported price decreases," it added. The report added that business leaders have diminished expectations for growth over the next half year.
The Philadelphia Fed's manufacturing index is a closely watched indicator and given the make up of factories in the bank's district, it is considered to be a reliable leading indicator of national activity in the sector. It is often seen as a proxy for the Institute for Supply Management's monthly national manufacturing index. On an ISM-equivalent basis the Philadelphia index slipped to 51.7 from 51.9. The most recent ISM survey, for May, had stood at 55.0.
"Manufacturing activity of mid-Atlantic based businesses accelerated in June, its second straight acceleration" after three months of "virtual stagnation," said Steve Wood, of forecasting firm Insight Economics. He said the report indicates that the ISM data "will show that nationwide manufacturing activity also continued to expand" although not as quickly as suggested by the Philadelphia report.
In the release, strength in manufacturing activity covered by the Philadelphia Fed district was broad-based. While price pressures continued to expand -- the prices paid index moved to 29.7, from 32.3 in May. The prices received index was a modest 5.1, versus the prior month's 2.2.
The bank also said its new orders index for June was 18.3, compared with 8.7 in May, while the shipments index hit 5.0, after standing at 9.3 the month before. Employment expanded more slowly, with that gauge at 5.6, down from 12.9 the prior month.
Michael Trebing, senior economist with the Philadelphia Fed, said "there was a big increase in the percentage of firms willing to relocate, and the main reason cited was the availability of skilled workers." Nationally, labor markets have remained tight even in the face of middling economic growth, and central bank officials have spoken of anecdotal signs that firms are having difficulties attracting highly skilled employees.
Jobless Claim Increase
The number of U.S. workers filing new claims for jobless benefits rose to a two-month high last week, suggesting the pace of job growth is slowing after robust gains in May.
Jobless claims were up 10,000 to 324,000 on a seasonally-adjusted basis in the week ended June 16, the Labor Department said Thursday. That third-straight increase pushed claims to their highest level since April 21. Claims for the June 9 week were revised to 314,000 from 311,000. The four-week average -- which economists use to gauge underlying labor market trends -- rose by 2,500 to 314,500.
The latest data topped Wall Street expectations. The median estimate of 17 economists polled by Dow Jones Newswires was for no change in new claims. There were no special factors affecting the figures, a Labor Department analyst said.
Recent jobless claims data suggest the strong momentum from May, when nonfarm payrolls expanded by a robust 157,000, waned a bit in June, though claims levels are still consistent with moderate employment gains. The latest claims figures include the survey period for the June employment report. Claims were up 28,000 from the similar period last month, suggesting somewhat softer payroll growth this month.
In addition to monthly employment data, signs of improvement in manufacturing and trade suggest the economy is rebounding quickly from last quarter's anemic 0.6% rise in gross domestic product, with some economists looking for growth to top 3% this quarter.
That brighter economic outlook has dashed investor hopes for Federal Reserve rate cuts this year. The Fed meets next week and is universally expected to keep the federal funds rate at 5.25%.
According to the Labor Department report Thursday, continuing claims for workers drawing unemployment benefits for more than a week rose by 39,000 to 2,523,000 in the week ended June 9, the latest week for which such data are available. The insured unemployment rate was unchanged at 1.9% in the June 9 week.
There were 37 states and territories reporting an increase in initial jobless claims for the June 9 week, while 16 reported a decrease. California had the biggest increase, 10,333, due to layoffs in trade and services industries. Michigan reported the biggest decrease, 1,093, due to fewer layoffs in the automobile industry. |
