July 22, 2011 9:29 AM EDT
Factory activity in the Mid-Atlantic region rebounded in July, but stubbornly high new filings for jobless benefits suggested an expected pick-up in economic growth in the second half of 2011 would be modest.
The Philadelphia Federal Reserve Bank said its business activity index, which gauges factory activity in the region, rose to 3.2 from a near two-year low of minus 7.7 in June. Orders, hiring and shipments all improved.
The increase, the first since March, showed underlying resilience in manufacturing -- a sector that has shouldered the economy's recovery from the 2007-09 recession but that has lost some steam recently.
Initial claims for state unemployment benefits increased 10,000 to 418,000, the Labor Department said a separate report, holding above the 400,000 mark that is usually associated with steady employment growth.
"Jobless claims are a leading economic indicator. These numbers don't support the case for having 3.5 to 4 percent growth in the second half of the year that some people had talked about," said John Silvia, chief economist at Well Fargo in Charlotte, North Carolina.
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The economy grew at a 1.9 percent pace in the first quarter and estimates for the April-June quarter range between 1 percent and 1.9 percent. The government will release its first estimate for second-quarter GDP on July 29.
Details of the Philadelphia Fed's survey, which beat economists' expectations, were relatively upbeat, with employment rising and a measure of new orders showing slight growth after contracting in June.
Even more encouraging, prices paid by manufacturers were the lowest in nine months, in line with other indicators showing a commodity-led spike in inflation was subsiding.
"A lot of firms had attributed slowing activity to higher prices, so moderating prices is consistent with a story of improving growth over the next six months," said Michael Trebing, a senior economic analyst at the Philadelphia Fed.
JOBLESS CLAIMS ELEVATED
U.S. financial markets were little moved by the economic reports, with investors taking their cue from signs of progress in Congress on raising the statutory borrowing limit and the determination of euro zone leaders to tackle the problems of heavily indebted governments in the region.
Stocks on Wall Street ended higher, while Treasury debt prices fell. The U.S. dollar hit a two-week low against the euro.
The jobless claims data covered the survey period for the closely watched nonfarm payrolls count for July, which will be released on August 5.
Initial claims fell 11,000 between the June and July survey periods. Along with the rise in the Philadelphia Fed survey's employment gauge, the data suggested a modest improvement in payrolls after a paltry 18,000 jobs gain in June.
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