Philadelphia Fed Factory Index Increased to -24.3

By Timothy R. Homan

Jan. 15 (Bloomberg) -- Manufacturing in the Philadelphia region shrank in January for the 13th time in the last 14 months as employment deteriorated at the fastest pace in more than three decades and orders kept dropping.

The Federal Reserve Bank of Philadelphia’s general economic index was minus 24.3 this month compared with minus 36.1 in December, the bank said today. Negative numbers signal contraction and the index averaged minus 21.3 last year.

Factories are curtailing production as consumer spending weakens and global demand falters amid a deepening recession. A report from the New York Fed showed manufacturing in that region contracted in January for a ninth straight month.

“The index remains deep in negative territory,” Anna Piretti, a senior economist at BNP Paribas in New York wrote in a note to clients. “Pent-up demand continues to shrink at a rapid pace.”

Economists forecast the index would fall to minus 35, according to the median of 53 projections in a Bloomberg News survey. Estimates ranged from minus 28 to minus 41.3.

The Fed Bank of New York today said its general economic index improved to minus 22.2 from a revised minus 27.9 in December. Still, a gauge of expectations six months from now was negative for the first time on record. Similar to the Philadelphia Fed’s index, readings below zero signal manufacturing activity is shrinking.

More Claims

Reports the Labor Department showed jobless claims jumped last week and wholesale prices dropped in December.

First-time applications for unemployment benefits rose 54,000 last week, more than forecast, to 524,000, signaling companies increased the pace of firings at the start of the year. The total number of people collecting benefits decreased from a 26-year high.

Producer prices fell 1.9 percent last month and were down 0.9 percent for all of last year. Last year’s drop was the largest since 2001.

The Philadelphia Fed’s employment index was minus 39, the lowest level since 1975, compared with minus 28.6 in December, the report showed.

The gauge of new orders was at minus 22.3 in January compared with minus 28.6 a month earlier, today’s report showed. The shipments index improved to minus 16.7 from minus 29.7.

Prices Falling

The prices paid index declined to minus 27 from minus 25.5 in December. An index of prices received improved to minus 26.2 from minus 32.8.

Expectations for the next six months turned positive for the first time since September. The index rose to 7.4 from minus 10.4 in December, today’s report showed.

The headline index is a separate question unrelated to the individual measures and some economists consider it a gauge of business sentiment.

Production is also slowing in other parts of the country, according to yesterday’s release of the Fed’s regional business survey known as the Beige Book. “Manufacturing activity decreased in most districts,” the report said.

A slowdown in global demand is also hurting American factories. U.S. exports dropped 15 percent from August through November, the biggest four-month decline since at least 1992, according to figures from the Commerce Department issued this week. Foreign purchases of American-made automobiles in November were the lowest in two years.

U.S. automakers fared no better domestically last month as General Motors Corp. and Chrysler LLC led a decline that capped the industry’s worst year since 1992. Chrysler sales in December dropped 48 percent from a year earlier, while GM was down 41 percent and Ford Motor Co. fell 33 percent.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net