WASHINGTON (AP) — Manufacturing grew in the Philadelphia region in October after contracting for two straight months, a sign factories are recovering after a sluggish summer.
An index of regional manufacturing activity jumped to 8.7 from -17.5 in September, the Federal Reserve Bank of Philadelphia said Thursday. It marked the best reading in six months. A positive reading suggests growth.
Economists were encouraged by signs of factory growth in the region. Weaker manufacturing in the Northeast and Mid-Atlantic regions intensified recession fears in August. The Philadelphia index plummeted in August to -30.7, down from a barely positive reading in July.
The August reading contributed to a sell off on Wall Street. After the August report was released, the Standard & Poor's 500 stock index tumbled 4.5 percent.
The rise "is another encouraging sign that the U.S. economy might not be headed for a recession after all," Paul Ashworth, economist at Capital Economics.
Even so, many economists cautioned that the Philly Fed report is volatile and therefore a limited guide to short-term trends.
New orders and shipments rose to six-month highs, though employment declined.
Manufacturers were also more optimistic about future business. The index measuring companies' outlook six months in the future rose to 27.2 from 21.4.
The survey covers manufacturing companies in Pennsylvania, New Jersey and Delaware. It follows a report earlier this week by the New York Fed that factory activity in that region continued to contract in October, though at a slightly slower pace.
- Federal Reserve Bank of Philadelphia