The economy is continuing to weaken, particularly in manufacturing, though some areas are not quite as bad as expected, according to the latest reports out Thursday.

AP

Factory activity in the US Mid-Atlantic region shrank for a sixth straight month in May, though not as sharply as expected, a Philadelphia Federal Reserve Bank survey showed Thursday.

Meanwhile, a gauge of manufacturing in New York State contracted in May even as its measure of inflation hit a record high, the New York Federal Reserve said.

And U.S. industrial production tumbled a bigger-than-expected 0.7 percent in April on the biggest drop in the manufacturing sector in nearly three years, the Federal Reserve said.

Separately, the number of US workers filing claims for initial jobless benefits rose by 6,000 in the latest week while the number on benefit rolls after a first week of aid hit a four-year high, the government said.

The Philly Fed said its business activity index was at minus 15.6 this month versus minus 24.9 in April. Economists polled by Reuters had forecast a reading of negative 19.0.

Any reading below zero indicates contraction in the region's manufacturing sector.

Earlier, the New York Fed's "Empire State" general business conditions index fell to minus 3.23 in May from positive 0.63 in April. The result was below economists' expectations for a reading of 0.0 in May.

It was the third consecutive week that continued claims were above 3.0 million and also the highest since March 2004.

The prices paid measure of inflation rose to 69.57 -- the highest since the start of the data series in July 2001. In April it was 57.29.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

The 0.7% decline in US industrial output--which includes factories, utilities and mines--was bigger than the 0.3% drop expected by economists.

Manufacturing output fell 0.8 percent, the biggest decline since a 1.0 percent decrease in September 2005.

Total industry capacity use stood at 79.7 percent of capacity, the lowest since September of 2005. Economists were expecting capacity utilization of 80.1 percent.

First-time jobless claims rose to 371,000 in the week ended May 10 from 365,000 for the prior week. Economists surveyed by Reuters had forecast the number of new claims at 370,000.

The four-week moving average of new claims, considered by economists a more reliable gauge of labor trends because it irons out weekly volatility, fell to 365,750 in the week ended May 10 from 366,750 in the prior week.

"These numbers are not good news. We are in an elevated unemployment period because of tight credit, higher oil prices, inflation hurting consumers," said Kurt Karl, chief U.S. economist at Swiss Re in New York. "To me, it just continues to deteriorate. It's just grinding higher in unemployment."

The number of people who remained on the benefit rolls after drawing an initial week of aid increased 28,000 to 3.06 million in the week ended May 3, the latest period for which figures were available.

It was the third consecutive week that continued claims were above 3.0 million and also the highest since March 2004.

"Continued claims are solidly above 3 millions ...As we head further into May, we continued to see layoffs outpacing hires, which means more job losses. If we are lucky, we could see another 20,000 decline like inApril," Christopher Low, chief economist with FTN Financial in New York.

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