Phila. manufacturing at 27-year high

Riding a wave of new orders, manufacturers in the Philadelphia area ramped up production this month to the highest level in more than 27 years, the Federal Reserve Bank of Philadelphia reported Thursday.

"The demand for manufactured goods is showing continued strength," the bank said in its monthly survey of local manufacturers.

The manufacturing survey was one of several reports Thursday that, in general, showed the nation's economy broadly gaining strength: Jobless claims fell in the latest week, an index of future economic activity rose in February, and consumer prices outside of food and energy are largely under control.

The flurry of economic data powered the stock market to a broad gain, with the Standard & Poor's 500 index and the Dow Jones industrial average each gaining about 1.4 percent, and the technology-driven Nasdaq rising nearly 1 percent.

The Philadelphia Fed's overall manufacturing index for the area rose in March to 43.4 from 35.9 last month. This month's figure was the highest since January 1984, when the index was at 47.0.

An index level above zero signifies growth in manufacturing activity, while numbers below zero signify contraction. During the 2007-2009 recession, local manufacturing shrank for 20 straight months.

"The manufacturing sector has made a good recovery," said Robert Brusca, president of Facts & Opinion Economics in New York. "It's good to see strength continuing."

The strength was broad-based, the Philadelphia Fed said, with manufacturers' shipments of finished products, unfilled orders, and labor conditions all at high levels.

But the biggest factor in this month's gain came in new orders received by the manufacturers. The Fed survey's index for new orders rose 17 points, its sixth straight monthly gain. That put this index at 40.3, the highest since November 1983.

The manufacturers also had an optimistic outlook for conditions over the next six months, with the survey's future activity index rising 16 points to 63.0, the highest since February 1993.

"More firms expect to increase employment over the next six months (33 percent) than expect to decrease employment (2 percent)," the Fed said.

When asked what change they anticipate in their firm's production in the 2011 second quarter compared with the first quarter, more than three-quarters said they expect output to increase. In a similar question a year ago, only about half expected an increase.

One area of concern is inflation: 64 percent of the manufacturers surveyed said they were paying higher prices for raw materials in March than in recent months. Also, 32 percent reported charging more for their manufactured products.

The Fed's Business Outlook Survey covered 84 manufacturers in the eastern two-thirds of Pennsylvania, the southern half of New Jersey and all of Delaware.

Here is a look at Thursday's other reports:

Unemployment. First-time filings for jobless benefits dropped by 16,000 in the week ended March 12, to 385,000. The four-week average of claims dropped to the lowest level since July 2008.

Prices. Consumer prices rose 0.5 percent in February, led by the biggest gain in food costs since 2008. Excluding food and fuel, the core gauge of inflation climbed a moderate 0.2 percent.

Factory output. Production at U.S. factories increased 0.4 percent in February, stoked by overseas demand and domestic retailers restocking their shelves. Motor vehicles and auto parts led the way.