PHILLY AREA MANUFACTURERS SENSE A BUSINESS PICKUP

J0BLESS CLAIMS STILL SHOWING EFFECTS OF STRIKE

Today the Philadelphia Federal Reserve Bank reported on the results of its April survey of manufacturers in the the third district. Between March and April, 47 percent of the firms surveyed reported no change in business activity. 35.3 percent reported an increase in activity and 18 percent reported a decline. Subtracting the losers from the gainers we obtain a reading for the bank's general business activity index of +17.3. Now, on a scale that runs from -100 to +100, this month's reading many seem to be just slightly North of nowhere. But, this month's reading is the highest in six months, and is a big improvement on the +3.8 and -0.1 readings in February and March.

In addition to the general business activity poll, the Philly Fed collects data and constructs sub-indexes that measure month-to-month changes in all the major elements of the repondents' business operations. Here's a summary of the sub-index results for April: new orders (+13.7), shipments (+27.6), unfilled orders (-19.6), delivery times (-17.3), inventories (-15.9), prices paid (+13.7), prices received (-6.7), number of employees (-1.1), and average employee workweek (+4.4).

From March to April, orders and shipments picked up. But, the demand was still sufficiently weak that more firms than not reported inventory buildups, lower backlogs of unfilled orders, and fewer problems making timely deliveries.

More respondents reported that their suppliers raised prices; but, fewer reported receiving increased prices for the goods they sold. One interpretation of this situation is that the increased costs will eventually show up in the prices charged by the manufacturers. But, this month marks the sixth straight month that the respondents reported lower prices received. So, thus far, any increases in costs for materials are being absorbed.

There was a slight drop in the number of employees index from March to April. And, it looks like any pickup in activity resulting from the new orders was handled by a small increase in the average workweek.

Overall, the survey respondents thought that things looked better than at any time in the past six months. But, only four of the sub-indexes showed gains while five showed losses. It appears that there are still some serious soft spots in the manufacturing sector in the third federal reserve district.

The Labor Department's Employment and Training Administration reported today that, during the week ending April 13, new claims for state unemployment insurance rose by 10,000 to 360,000. The more-smoothly-varying four-week moving average of new claims decreased slightly from 393,750 to 387,250. The overall trend of the four-week moving average is still up.

The April 13 four-week moving average still incorporates data from the last week of the GM strike. It will be interesting to see what happens to this indicator next week.

Byline: Lafferty (MF Merlin)