Philly Fed shows manufacturing in steady advance

Following an upbeat reading from the Empire survey earlier in the week, the Philly Fed’s Business Activity Index showed  that manufacturing in the mid-Atlantic region continues to expand at a fairly healthy clip.

Released this morning, the index increased from 15.2 in January to 17.6 in February, the sixth straight reading above zero.  A reading above zeros is expansionary.

More importantly, new orders jumped from 3.2 to 22.7, indicating that production gains should continue into the spring.

Prices, however, remain a sticking point, with prices paid (32.4) by manufacturers continuing to advance, but the relative lack of demand and plenty of excess capacity are making it difficult to pass along higher costs. Prices received edged up to 3.7.

Overall, the Philly Fed Index points to continuing gains among goods-producers, as exports rise and companies replace depleted inventories.

Jobless claims – can’t seem to get any satisfaction

Weekly initial jobless claims have been stuck in a rut for about two months – and that’s bad news for those who still face the insecurity of a layoff or are looking for employment.

However, recent bad weather and factors related to reporting the data may be muddying the waters of this once reliable indicator.

More at Examiner.com.

New home construction muddles along

Housing starts have bottomed but a recovery has been far from robust, as we are not seeing much in the way of upward momentum in the new  home market.  Fortunately, new home sales make up less than 10% of the housing market.  Unfortunately, very modest gains in new home construction translate into only modest increases in jobs and GDP.

Builder confidence has improved off extremely depressed levels but remains in the basement.  A reading of 50 indicates home builders are neither confidence or pessimistic about the market.

Empire survey reflects rebound in manufacturing

The Empire Manufacturing Index is released by the New York Federal Reserve and provides a look at how well (or how poorly) manufacturers are doing in New York.  Although the survey is narrow in scope, it is the first peek at how manufacturers are doing in the current month, so it does get some attention.

And that first look provided a bit of good news, as the Empire survey jumped 9 points to 24.9 in February.  A reading above zero signals that companies are expanding production.

Manufacturers have now moved forward for seven consecutive months, while employment, which has been hit very hard during the recession, moved ahead for the second straight month.

Later in the week, the Philly Fed’s Business Activity Index will offer a move in-depth look at manufacturing.

Solid manufacturing recovery thus far

At this point in the business cycle, manufacturing has been one of the bright spots in what has otherwise been a sluggish recovery.

Reason: the severe cutbacks in production over a year ago helped to whittle away excess inventories.  Companies are now ramping up production in order to replace depleted stockpiles.

This cycles won’t last forever, and improving consumer demand is needed in order to put the recovery on a more permanent and sustainable path.  With consumer confidence gradually coming back to life, demand should eventually pick up.

Job creation would go a long way in boosting confidence and demand.  At this juncture, that may be slow to occur.

Consumer sentiment slips in latest month

But favorable trend intact

Consumer sentiment, as measured by the popular University of Michigan survey, fell 0.7 points in February to 73.7.

However, consumer confidence, as viewed by the chart, continues to slowly improve amid signs that the economy is gradually strengthening.

A more thorough analysis is available at Examiner.com.

Weekly jobless claims fall, downward trend appears intact

Weekly initial jobless claims fell 43,000 in the latest week to 440,000, appearing to confirm that the elevated levels of the last couple of weeks may have been caused by technical factors related to the holidays.

That’s good news given that it appears the slow recovery in the troubled labor market has not stalled and the modest economic recovery is not faltering.

Details are available at Examiner.com.

Wholesale inventories decline

Destocking continues

A 0.8% rise in sales and a like decline in wholesale inventories in December pushed the inventories-to-sales ratio, or how many months it would take businesses to liquidate stockpiles, from 1.14 in November to 1.12 in December.

Companies are running lean when it comes to holding onto goods that customers may demand. And the lack of goods on hand should lend support to the economy in the short term as companies restock.

In fact, a recent boost in production and a rise in inventories was a big contributor to the strong 4Q advance GDP report issued a week ago.

The drop in inventories at the end of the year could signal a downward revision when the next estimate hits in  a couple of weeks.  Still, sales are up almost 6% from one year ago, underscoring that the economy has begun to improve.

Rising weekly jobless claims highlight weak labor market

Weekly initial jobless claims increased by an unexpected 8,000 to 480,000 in the latest week, while the 4-week moving average jumped 11,750 to 468,750.

Continuing claims were nearly unchanged at 4.6 million and though down over 2 million from the peak last year, much of the decline is simply the result of the expiration of the standard six months in benefits.

Details on Examiner.com.

Service sector struggles to find traction

Manufacturing has been accelerating but the broad-based service sector continues to struggle, according to the latest survey from the Institute for Supply Management.

The ISM Non-Manufacturing Index increased from 49.8 in December to 50.5 in January but remains stuck in the narrow range it has been in for the past five months. A reading above 50 points to expansion.

Though back in expansionary territory, at 50.5, firms in the service sector are barely expanding amid continued high unemployment and  sluggish consumer consumer spending.

Based on the survey, companies remain reluctant to hire, with the employment index rising just 1 point to 44.6.

If job creation remains elusive, expect the Federal Reserve to hold the fed funds rate at 0 – 25 basis points and maintain its language that current conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”

Manufacturing – Up, up and away

ISM portends further gains

At a reading of 58.4 and little in the way of bad news buried in the report, the ISM Manufacturing Index is signaling continued improvement in factory output.

A more in-depth look is available at Examiner.com.