US regional manufacturing strengthens but pockets of weakness remain

Philly Fed monthly manufacturing index rises to two-month high, but fears remain over shipments and new orders


A key measure of US regional factory health unexpectedly strengthened in November, as manufacturers in the mid-Atlantic area reported greater optimism. However weakness was evident in more forward-looking elements, such as new orders and current shipments.

The Philadelphia Federal Reserve’s monthly index of manufacturing business activity rose to a two-month high of 10.4 in November, up from 5.6 in October and snapping a three-month long decline.

The index, which gauges mid-Atlantic manufacturing activity, frequently serves as a proxy for the nationwide factory sector.

“The survey’s broad indicators remained positive, although their movements were mixed this month. The indicator for general activity increased, but the new orders, shipments, and employment indicators decreased from their readings last month,” the Philadelphia Federal Reserve said.

While the indicator for general activity increased, the sub-index for new orders fell sharply to 8.4 from 26.2. The shipments subcomponent fell to 9.8 from 18.9 and the employment subcomponent to 21.5 from 32.9.

US factories, like overseas competitors, have faced severe headwinds from a slowing global economy and the impact of the tariff conflict between Washington and Beijing in the last almost-18 months.

Looking ahead, most manufacturers were upbeat for the coming six months on almost all fronts. Over the next half year, 52 percent of managers surveyed anticipated an improvement in general activity, while 60 per cent expected pick-ups in new orders and shipments.

The Institute for Supply Management (ISM), which surveys manufacturers across the country, in its most recent survey said only five out of manufacturing sectors out of 18 surveyed reported growth in October.

FURTHER READING: October US job growth slows at lesser rate than expected

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