June’s U.S. Mid-Atlantic factory movement was weak enough to overshadow hopeful labor and housing market readings. Thursday’s mixed reports reflected a still-struggling 2nd quarter economy but showed hope for the coming months. Economist Robert Dye said recovery is still in a soft patch that began in the 1st quarter and has extended. But at the same time, the first glimmers of evidence that the economy will find terra firma in the second half of the year is observed, he added.
Mid-Atlantic factory activity gauge, Philadelphia Federal Reserve Bank’s business activity index, was a -7.7 against economists’ estimate of 6.8. Nobody expected a lower than zero reading. It signaled weakening in the national factory activity. Meanwhile, first-time unemployment insurance applications were at 414,000 (16,000 down), showing hope in the jobs sector. Homes report showed a rise of 3.5% to an annual rate of 560,000 units in May. New buildings permits were at 8.7%, their highest since December. Factory activity drop in New York as reflected in the Philadelphia Fed report caused fears that manufacturing, which was a major factor in U.S. economic recovery, is slowing down. While there were supply disruptions that hampered factory activity mainly for automobiles after Japan’s disasters, it is not a major factor. Still, it is a sign of fundamental flaw, said the Philadelphia Fed and New York Fed surveys.
The national factory activity gauge, the Institute for Supply Management, may contract in June, according to economists. Survey results are due on July 1. Six-month business state index as seen in the Philadelphia survey was at its lowest since December 2008. New order was down to a 2-year low. FTN Financial economist Christopher Low said a decline in the six-month forward activity index suggests there is more to the slowdown in Philly area manufacturing than just a temporary part shortage. Wall Street stocks did well but were limited by Greece default worries. U.S. Treasury prices gained while benchmark yield dipped to lowest. The dollar was also down.
Jobless claims and housing data may have been positive, levels are still indicative of a slow economic recovery. Initial jobless claims remained higher than the 400,000 level in 10 weeks, an indication of a stable labor market, said economists. The positive May activity in housing starts and permits, they remain weak due to tough competition posed by unsold second-hand homes. Economists anticipate more descent in housing prices. They see a very marginal rise next year. In RealtyTrac report, it showed that banks reclaimed over 66,879 homes in May which was 4% lower from April.