Factory activity in the U.S. Mid-Atlantic region edged up in May, with a strong jump in prices paid but a plunge in the employment index and new orders component, according to a survey released on Thursday.
The Philadelphia Federal Reserve Bank said its business activity index rose to 14.4 in May from 13.2 in April. Wall Street analysts had called for a decline to 12.5 in May.
Any reading above zero indicates growth in the region’s manufacturing sector.
A measure of prices paid by manufacturers jumped to 55.3 in May from 29.0 in April. The May prices paid reading was the strongest since a reading of 66.7 in October 2005.
The new orders index, a gauge of future growth, fell to 2.7 in May — its weakest since September 2005 — from 12.2 in April.
The survey’s jobs component slumped to 1.1 in May, its weakest level since November 2003, from 21.7 in April.
“The headline number tells us that the factory sector in the Mid-Atlantic region seems to be growing at a good pace, but the fact that the sub-indexes on orders and employment were weaker suggests that we may be seeing moderation in economic growth,” said Patrick Fearon, senior economist at A.G. Edwards and Sons.
U.S. Treasury debt prices initially dipped as investors reacted to the headline number, then extended gains once investors looked at the details within the report pointing to a possible slowing of economic growth.
Any sign of weakness in the economy could influence the Federal Reserve to pause in their campaign of increasing official interest rates.
U.S. stocks were trading higher on Thursday, although the jump in the prices paid component of the Philadelphia Fed survey kept investors on edge about inflationary pressures.
The regional survey is one of the first indicators of U.S. manufacturing every month and is often used as a guidepost to the overall state of factories nationwide.
