Philadelphia, PA, May 20--The Federal Reserve Bank of Philadelphia reported that manufacturers in its region saw a sharp slowdown in growth and employment in May, though an easing of inflation pressures lessened the blow.
The Philadelphia Fed said its business-conditions index, a measure of manufacturing growth in the region, declined to 7.3 in May from April's 25.3 and March's 11.4. Readings above zero indicate expansion. The prices-paid index declined to 30.9 from April's 50.5, while the prices-received index hit 15.7 after the prior month's 28.
The report is one of the first releases detailing economic conditions in May. As a result, it is closely watched in financial markets. It followed the Federal Reserve Bank of New York's Empire State release this week, which showed industrial activity contracted in that region this month. Moreover, the Federal Reserve Board said this week that industrial production nationwide contracted in April, in part because of the struggling auto sector.
"Respondents were less optimistic about future conditions this month than in April, but overall expectations suggest that manufacturing growth is expected to continue," the Philadelphia Fed said in its report.
Many economists have become convinced in the past few weeks that their concerns about an economic slowdown were overblown last month. That is because data on housing, employment and consumer spending have proved relatively robust. Yesterday's report indicated the economy still has weak spots.
