Area manufacturing making a comeback

The Philadelphia region's manufacturing index soared this month to its highest level since April 2005, according to a monthly survey released yesterday by the Federal Reserve Bank of Philadelphia.

The June report supports the view that the national economy has shed its sluggish performance from earlier this year.

The broad manufacturing index rose to 18 this month from 4.2 in May. A zero reading indicates no growth.

"The economy continues to move forward, and while housing remains a basket case, manufacturing is no longer restraining growth," Joel Naroff, chief economist with Commerce Bank in Cherry Hill, wrote yesterday after the survey was released.

The closely watched Fed survey also showed that prices for raw materials remain a concern and that Philadelphia-area firms are having a difficult time getting higher prices for their own products.

Twenty-one percent of the manufacturing firms said they were increasing employment, and 16 percent said they were reducing payrolls. The other firms reported steady payrolls.

According to the U.S. Bureau of Labor Statistics, 200,600 workers were employed at manufacturing plants in the Philadelphia region, including South Jersey, in May. That was down about 3,000 workers from May 2006.

In response to a question not normally part of the survey, more executives said they were considering moving some or all of their manufacturing outside the Philadelphia area in the next five years, according to the survey.

This year, 27 percent of the executives said there was a "probability" of relocating some operations. Last year, 16 percent said there was a probability. Two big reasons were cited: labor costs, and taxes and government regulations.