Mid-Atlantic factory activity slows

July 21, 2007 - 0:0

NEW YORK (Reuters) -- U.S. factory activity in the mid-Atlantic region grew slower than expected in July after a surprise surge in June, and initial claims last week for U.S. jobless benefits fell to a two-month low, a survey and a report showed on Thursday.

In another report, a forward-looking indicator of economic activity suggested cooler growth in the second half of 2007, an economist for the Conference Board said. In a survey, the Philadelphia Federal Reserve Bank said its business activity index was at 9.2 in July versus 18.0 in June. Economists polled by Reuters had forecast a reading of 13.3. Any reading above zero indicates growth in the region's manufacturing sector. ""It looks like we gave back most of the gain from June. I am not sure that it is a game changer for the bond market or the broader economy. It is a regional report and a volatile one at that,"" said Greg McBride, senior financial analyst with personal finance website Bankrate.com, North Palm Beach, Florida. The reports came as Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee in Washington that losses associated with sub-prime mortgages could reach $100 billion, the first time he had put a figure on potential losses. ""The credit losses associated with sub-prime have come to light and they are fairly significant. Some estimates are in the order of between $50 billion and $100 billion of losses associated with sub-prime credit products,"" Bernanke said. In other comment, Bernanke said more data is needed before the U.S. central bank is convinced inflation is truly moderating, and that declines in U.S. home prices could curb consumer spending. First-time claims for state unemployment benefits fell to 301,000 last week from an upwardly revised 309,000 claims the prior week, the Labor Department said. Economists had expected them to rise slightly. It was the second consecutive weekly decline and took initial claims to their lowest level since mid-May. In a separate report, the New York-based Conference Board said its Index of Leading Economic Indicators fell 0.3 percent in June after a downwardly revised 0.2 percent rise in May. ""The leading index has slowed in recent months, suggesting a possible softening of the overall pace of economic activity later in the second half of this year,"" said Ken Goldstein, the board's labor economist. Prices for U.S. government bonds slipped as the unexpected drop in weekly claims offered an excuse for investors to book profits. U.S. stocks opened with solid gains as companies reported earnings above expectations. ""It is still a mixed job picture,"" said Robert Brusca, chief economist for Fact and Opinion Economics in New York. A four-week moving average of initial claims, a more reliable gauge of the pace of layoffs because it irons out weekly fluctuations, fell to 312,000 from an upwardly revised 318,250 the previous week. However, the number of workers remaining on benefit rolls after drawing an initial week of aid rose 20,000 to 2.57 million in the week ended July 7, the latest period for which figures were available. The rise pushed the so-called continued claims to their highest level in three months. Initial claims are falling and continued claims continue to creep up. This suggests that people are receiving their claims longer than before,"" Brusca said. ""Still, the job market has reasonable strength,"" he added. Analysts said July is typically a volatile month for jobless claims as auto plants and other factories shut down temporarily for retooling