Philly Fed Index Unexpectedly Jumps To Three-Year High In July

(RTTNews) - Firms responding to the Philadelphia Federal Reserve's Business Outlook Survey indicated a continued expansion in the region's manufacturing sector in July, with the index of activity in the sector jumping to its highest level in over three years.

A report released by the Philly Fed on Thursday showed that its diffusion index of current general activity jumped to 23.9 in July from 17.8 in June. A positive reading indicates growth in regional manufacturing activity.

The sharp jump by the Philly Fed index came as a surprise to economists, who had expected the index to drop to a reading of 16.0.

With the unexpected monthly increase, the Philly Fed index reached its highest level since hitting 34.7 in March of 2011.

The significant increase by the Philly Fed index reflected notably faster growth in both new orders and shipments.

The new orders index surged up to 34.2 in July from 16.8 in June, while the shipments index soared to 34.2 from 15.5 in the previous month.

The report also showed that the number of employees index inched up to 12.2 in July from 11.9 in June, indicating a slightly faster rate of job growth.

The prices received index also edged up to 16.8 in July from 14.1 in June, while the prices paid index dipped to 34.7 from 35.0.

Looking ahead, the Philly Fed said most of the survey's broad indicators of future growth showed improvement again this month.

The future general activity index climbed to 58.1 in July from 52.0 in June, reaching its highest level since last October.

However, the reading on the outlook for capital expenditures showed a notable decrease, dropping to 18.9 in July from 31.0 in June.

Peter Boockvar, managing director at the Lindsey Group, said, "Outside of the disappointing survey on cap ex (we need much more in light of slow productivity), the figure was a positive read on manufacturing as the economy continues to recover from the punk but strange Q1."

"If only short rates weren't at zero and QE 3 and 4 never happened, we'd actually be having a somewhat normal recovery," he added.

On Tuesday, the New York Fed released a separate report showing that its reading on regional manufacturing activity reached its highest level in more than four years in July.

The New York Fed said its general business conditions index climbed to 25.6 in July from 19.3 in June, while economists had expected the index to drop to a reading of 17.0.

With the unexpected increase, the general business conditions index reached its highest level since hitting 26.3 in April of 2010.