May 16, 2013 / 3:00 PM / 5 years ago

UPDATE 1-Philly Fed factory activity contracts in May, new orders drop

NEW YORK, May 16 (Reuters) - Factory activity in the U.S. mid-Atlantic region contracted in May as new orders fell and its employment index hit a more than three-year low, the latest figures to suggest growth in the second quarter is cooling, a survey showed on Thursday.

The Philadelphia Federal Reserve Bank said its business activity index dropped to minus 5.2 from 1.3 in April, worse than economists’ expectations for a slight gain to 2.4.

Any reading below zero indicates contraction in the region’s manufacturing. The survey covers factories in eastern Pennsylvania, southern New Jersey and Delaware.

New orders fell to minus 7.9 from minus 1, the lowest level since June of last year.

Employment gauges also deteriorated, with the measure of the number of employees at its weakest since September 2009 at minus 8.7 from minus 6.8. The average work week index slid to minus 12.4 from minus 2.1.

The report is seen as one of the first monthly indicators of the health of U.S. manufacturing leading up to the sector’s national report. The survey rounded out a batch of data on Thursday that gave worrisome signs for the economy.

But providing a silver lining, survey respondents’ view on the coming months perked up with the gauge of business conditions for the next six months rising to 32.3 from 19.5.

Treasuries prices gained further shortly after the data, while the dollar hit a session low against the euro.

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