NEW YORK (CNN/Money) - The first readings on manufacturing in April showed sharp improvements that were better than forecasts, according to reports released by two Federal Reserve banks Thursday.
The Empire State Manufacturing Survey from the New York Fed came in with an April reading of 36.05, up from 25.3 in March. Analysts surveyed by Briefing.com were only looking for an increase to 29.0.
The Philadelphia Fed's manufacturing index jumped to 32.5 from 24.2 in March. The consensus forecast of analysts was for a gain to only 26.0.
"Both the new orders index and the shipments index also showed improvement this month," said the Philadelphia report. "Most current indicators improved this month and continued to reflect growth in the region's manufacturing sector. Indicators for general activity, new orders, and shipments all rose from their readings in March. "
The Empire State survey is often looked to as a bellwether of manufacturing activity in the rest of the nation as well, since it is the first index of manufacturing activity that is released every month. The reading had fallen sharply in March from a record 42.05 reading in February in the two-year old index.
The Philadelphia survey, which is far more established, is also watched as an early reading of manufacturing.
The New York index, which surveys about 200 manufacturing executives in the state and receives replies from about half of them, showed strong improvement in just about all measures.
"The new orders and shipment indexes rose to levels suggesting substantial ongoing improvement," said the survey report. "Price indexes continued their upward climb to reach new highs, and employment indexes increased markedly, indicating an expansion in hiring activity. Future indexes remain extremely positive, and the capital expenditures index reflected escalating spending activity."
The one concern for investors could be about rising prices, as 57 percent of respondents in the New York survey reported higher prices and virtually none reported a decline.
The higher prices, while good for manufacturers' earnings, could prompt the Federal Reserve to raise interest rates that they've kept at historically low levels for more than a year.
Wednesday's report on consumer prices, which came in with higher inflation rates than forecast, also raised the expectation of the Fed moving on rates, and the Empire State index compounds the view that the Fed will be acting sooner rather than later, said Bill Cheney, chief economist for John Hancock Financial Services.
"It fits in with the picture that the labor market is turned, inflation has turned and in a few more months they'll be tightening," said Cheney. He said that he now believes the Fed will raise interest rates in August, although he said action at the June meeting is also possible.
"Inflation bottoming out and starting to turn up is one of the things that had to happen before they got in this tightening track," he said.
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