By Courtney Schlisserman Aug. 19 (Bloomberg) -- Manufacturing in the Philadelphia region unexpectedly shrank in August for the first time in a year, a sign factories are being hurt by the U.S. economic slowdown. The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7 this month, the lowest reading since July 2009, from 5.1 in July. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. Manufacturing is slowing after leading the economy out of the worst recession in seven decades as consumers rein in spending. With factory growth waning and companies slow to add employees, the economic expansion will slow in the second half of the year. “Demand is weakening,” Scott Anderson, a senior economist at Wells Fargo Securities in Minneapolis, said before the report. “We’ve seen some of the best news we’re going to see on the manufacturing front for a while.” Economists forecast the measure would rise to 7, according to the median of 58 projections in a Bloomberg News survey. Estimates ranged from minus 6 to 10. Other reports showed applications for unemployment benefits unexpectedly climbed and a gauge of the economy’s outlook rose for the second time in four months. Initial jobless claims rose by 12,000 to 500,000 in the week ended Aug. 14, Labor Department figures showed. Claims exceeded all estimates of economists surveyed and compared with the median forecast of 478,000. The increase signals companies are stepping up the pace of firings as the economy slows. The index of leading indicators increased 0.1 percent in July after dropping 0.3 percent the prior month, according to figures from the Conference Board, a New York research group. The gauge, which measures the economic prospects over the next three to six months, has shown a see-saw pattern that indicates slower growth through the end of the year. To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

Source