Philadelphia manufacturing activity slows slightly in April, few worried about slowdown

April 20, 2012

The pace of factory activity in the mid-Atlantic region slowed slightly in April, marking the first time in five months that the reading has not expanded, Reuters reported. New orders fell to their lowest since September, but there were still some positive data for manufacturers in the region.

According to the news outlet, the Philadelphia Federal Reserve Bank said its business activity index fell from 12.5 in March to 8.5 in April, marking the lowest level that has been achieved since January. Despite the drop, there are still many within the industry that have remained positive about American manufacturing.

Bloomberg News reported that many economists have noted that the slight drop in activity has to do with the blistering pace that the manufacturing sector set over the past several months, as a return to normal had to occur at some point.

"The slowdown in manufacturing is something to watch, but given how fast production had been growing, a pause that refreshes is not a surprise," Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, told the news source. "The economy is growing moderately and should continue to do so. But there are still a number of hurdles and risks that are keeping the recovery from really kicking into high gear."

Another contributing factor to the slight decline may have been slowing economies in Europe and China, as the industrial activity in these nations led to a lower-than-expected orders index.

Employment was a bright spot in the report as the Philadelphia Fed’s jobs gauge increased to 17.9 in April, according to Bloomberg. This represented an 11- month high, up from a reading of 6.8 last month. The increase in hiring may have led to a reduction in hours as the average workweek measure fell slightly.

MarketWatch reported that the reading from the Philly Fed simply shows that manufacturing is coming in line with the rest of the economy.

"When taken together, the two surveys suggest that the industrial recovery is coming off the boil, but nothing more," Paul Dales, senior U.S. economist at Capital Economics, told the news source.

This notion, along with the fact that hiring picked up during the month in the region, shows that companies within the sector are not adjusting manufacturing strategy and are still looking to the rest of the year as a period of growth.