The Federal Reserve reports from New York and Philadelphia showed some very nice progress this month, a positive sign given the makeup of the manufacturing community in this region. The two reports cover some older industrial areas and represent diverse consumer sectors, from high tech and electronics to apparel to steel.
There also is a very large population affected by the reports, as these are some of the most densely populated cities in the nation. If there is progress in this region, it suggests that manufacturers are seeing gains across a wide variety of consumer sectors. Additionally, growth here is likely to make a more significant dent in the unemployment rate than growth in the energy regions such as the Dakotas.
The New York Fed saw its business index rise from 19.53 in February to 20.51 in March. This may not seem like a major jump, but this is the highest level the index has reached since 2010. There was a similar hike in the Philadelphia index as it moved from 10.2 to 12.5, which is the best reading it has seen since 2011. It was only a few months ago that both regions seemed to be slacking off and that had created some alarm.
Analysis: One of the most encouraging pieces of this data relates to both the slump in the last few months of last year and the recovery at the start of this one. One factor that led to the decline in the last quarter of 2011 was that these two regions are especially sensitive to the conditions in Europe.
Now that the numbers are looking better, does that mean that Europe is back in the thick of things again?
There has been some improvement in the prospects for the euro zone, but not enough to bolster the manufacturing sector that much. The fact is that companies in this region have broadened their markets considerably in the last year and that is starting to pay off. These companies are selling into Latin America and even to Asia, which makes them less vulnerable to the vagaries of business in Europe.
Chris Kuehl, PhD, NACM economist