Manufacturing in the U.S. Mid-Atlantic region bounced back in July after unexpectedly shrinking the month before, but still remained weak, a survey showed on Thursday.
The Philadelphia Federal Reserve Bank said its business activity index rose to positive 3.2 from minus 7.7 the month before. That topped economists' expectations for 2.0, according to a Reuters poll.
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Any reading above zero indicates expansion in the region's manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.
It is seen as one of the first monthly indicators of the health of U.S. manufacturing leading up to the national report by the Institute for Supply Management.
"It still shows we're in a soft spot, but maybe starting to pull out with a little bit of an increase this month," said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis, Missouri. "We still have some headwinds, so we wouldn't expect a quick snap back in the economy."
The July reading was the first month-over-month gain in the index since March.
Last month the index fell to its lowest level in nearly 2 years. Manufacturing has slowed in recent months, though some regional surveys rebounded in June and the larger national report last month showed a modest uptick in the pace of growth.
The new orders index rose to 0.1 in July from minus 7.6, while the employment gauge climbed to 8.9 from 4.1. Prices paid fell to the lowest level since September 2010 at 25.1 from 26.8.
U.S. stocks added to gains immediately following the report, while Treasury prices extended losses and the euro hit a session high against the dollar.
Separate data showed growth in euro zone factories ground to a halt in July, while China's factory sector contracted for the first time in a year.