Sector continues to show resilience

A sector once thought to be on its last legs continues to surprise. The latest report from the Bureau of Labor Statistics noted that 24,000 manufacturing jobs were added in April.

One specific indicator of growth came from The Philadelphia Fed manufacturing index, which jumped to 34.4 in May from 23.3 in April, the regional district of the central bank said. That was well above the economist consensus for a reading of 21 and the highest reading in a year. Any reading above zero indicates improving conditions.

Readings for new orders posted near-record numbers in May, rising to 40.6 from 18.4. That is the highest reading since March 1973. The shipments index, although much more modestly, also rose to 25.8 from 23.9 in April. Price indexes suggested continued inflation pressures. The prices received index, reflecting manufacturers’ own prices, increased 7 points to a reading of 35.4, the highest since February 1989.

Separately, The Empire State factory index rose 4.3 points to 20.1. The strength in the two surveys may support hopes of a turnaround in the national Institute for Supply Management factory survey due in two weeks. The ISM factory manufacturing index slipped to 57.3 in April, its second drop in a row and the lowest level in nine months. While this still suggests solid growth, purchasing managers have tempered their enthusiasm.

U.S. factory output rose in April, although new estimates of manufacturing and overall industrial production showed less growth in prior months than initially believed, casting a shadow over the economic outlook.

Manufacturing output rose 0.5 percent last month, the U.S. Federal Reserve said on Wednesday in a report on output across the industrial sector, which comprises manufacturing, mining, and electric and gas utilities.

Economists polled by Reuters had forecast a 0.5 percent rise in manufacturing. But the Fed’s new estimates of factory output in prior months showed output was slightly lower than previously believed in each month between November and March.

Overall industrial output expanded 0.7 percent in April and estimates of output in three of the previous four months were also lowered, including a sharply reduced estimate for February.

A 2.3 percent increase in machinery production bolstered the overall gain in factory output, although a drop in production of primary metals and fabricated metal products weighed on the sector.

The report follows a survey of factory managers published earlier this month that showed a slowdown in U.S. factory activity, with manufacturers complaining about rising commodity prices in the wake of the Trump administration’s tariffs on steel and aluminum imports.

The utilities index jumped 1.9 percent last month.

In the 12 months through April overall industrial output rose 3.5 percent.

The percentage of industrial capacity in use rose 0.4 percentage point in April to 78.0 percent.

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