Philadelphia-area manufacturing improves in July

July 19, 2012

The U.S. manufacturing industry has recorded several slight setbacks in the past three months, but newly released data indicates that this slight stagnation could be reversed.

The Philadelphia Federal Reserve Bank said that its business activity index rose to minus 12.9 from minus 16.6 in June, representing a slight increase and moving the sector closer to growth. According to Reuters, this reading was lower than the estimates from a number of economists, but still showed that a recovery from a low point in the past three years is a distinct possibility.

The forward-looking new orders index also rose, as this measure increased to minus 6.9 in July from a low point of minus 18.8 in June. The reading still favors contraction within the industry, but this indicator has mixed messages for economists.

"We are not seeing much of a rebound from the devastating June number," Sean Incremona, economist at 4Cast Ltd in New York, told Reuters. "There is underlying softness in manufacturing. It probably understates the broader activity throughout the nation, but it still goes to show you that the weak trends are persisting."

The indicator for new orders and shipments remained positive during July, despite a drop from 19 to 12 for the month when compared to June numbers. Demand was seen to have stayed the same during this period, as those surveyed by the Philadelphia Fed indicated mixed sentiment regarding business activity, according to the report.

However, a feeling of optimism persists in the sector despite the slight drop in activity for the past three months.

"The outlook among reporting firms, while not as optimistic as last month, suggests that firms believe that activity will rebound over the next six months," said the authors of the report.

This report came as executives for U.S. manufacturers gave their input on the potential transition from increased tax breaks to a lower corporate rate, according to Bloomberg News.

This adjustment of business strategy would help some firms, while hurting others, one executive told the House Ways and Means Committee in Washington, D.C.

"I don’t think it’s quite time yet to choose which ones stay and which ones go," said Diane Dossin, chief tax officer at Ford. "For Ford’s business to go forward in the U.S., we think the low rate is the single most important thing."