Philly Fed Outlook, Leading Indicators Jump

Manufacturing in the U.S. Mid-Atlantic area contracted in June for the ninth consecutive month but much less severely than expected and far less than in the previous month, a regional Federal Reserve survey released on Thursday showed.

Separately, a forward-looking measure of the U.S. economy in May increased for the second consecutive month, a private research firm said on Thursday.

The Philadelphia Federal Reserve Bank said its business activity index rose sharply to minus 2.2 in June from minus 22.6 in May, the highest reading since September 2008.

That was well above economists' expectations of minus 17, based on the median of forecasts among economists polled by Reuters.

"We're still in this healing process, and this is one of the better indications that manufacturing may be getting better," said Kurt Brunner, portfolio manager with the Swarthmore Group. "It shows there are pockets where you're seeing some improvement, but by no means do I think this is the all-clear signal that we're off to the races."

The manufacturing survey also showed the outlook for business conditions at its highest level since September 2003.

The survey covers factories in a region encompassing eastern Pennsylvania, southern New Jersey and Delaware and is looked at closely as one of the first indicators of the health of the U.S. manufacturing sector.

The index of leading indicators, which is supposed to forecast economic trends six to nine months ahead, rose 1.2 percent in May after a revised 1.1 percent increase in April, the New York-based Conference Board said.

The May increase was the largest since a 1.4 percent rise in March 2004.

"The recession is losing steam," said Ken Goldstein, a Conference Board economist. "Confidence is rebuilding and financial market volatility is abating."

Wall Street economists had forecast a rise of 0.9 percent after an initial 1.0 percent April increase.

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