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Thu May 17, 2012, 10:57 AM

Manufacturing in Philadelphia Area Shrinks for First Time in Eight Months [View all]

By Lorraine Woellert - May 17, 2012 10:38 AM ET

Manufacturing in the Philadelphia region unexpectedly shrank in May for the first time in eight months, reflecting a drop in orders and employment.

The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 5.8 this month, the lowest reading since September, from 8.5 in the previous month. Economists forecast the gauge would rise to 10, according to the median estimate in a Bloomberg News survey. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

Slower economies in Europe and China may restrain exports and limit orders to U.S. factories, which have been a mainstay of the almost three-year-old expansion. At the same time, increased demand for automobiles, which sold in the first quarter at the fastest pace in four years, is helping underpin manufacturing.

“We’re in a choppy and uneven recovery,” said Sean Incremona, a senior economist at 4Cast Inc. in New York, who had the lowest forecast in the Bloomberg survey. “This is a disappointment. It only goes to show us that the recovery as a whole isn’t gathering any momentum.”



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