Your Economy (No Politics)

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Manufacturing activity slows in Philadelphia area
2006-JAN-19 17:56 GMT


Philly Fed index drops unexpectedly to 3.3 in Jan.

WASHINGTON (AFX) -- Manufacturing in the Philadelphia region slowed to a crawl in January, the Federal Reserve Bank of Philadelphia reported Thursday.

The Philly Fed diffusion index fell to 3.3 from 10.9 in December. Readings over zero indicate expansion. This is the lowest level since last June.

The decrease was unexpected. Economists polled by MarketWatch had been anticipating that the index would rise to about 12.0.

Despite the drop, new orders and shipments and employment improved in January, the Philly Fed's data showed.

The new orders index rose to 11.1 from 5.8, while the shipments index rose to 18.6 from 9.4.

The unfilled orders index rose to a negative 0.9 from a negative 1.5.

Inventories rose to 9.1 in January from 4.1 in the previous month.

Inflation pressures eased somewhat in the Philadelphia region.

The prices paid index dropped to 44.9 in January from 47.1, while the prices received index fell to 21.9 from 29.7 in the previous month.

Despite the drop, 53% of manufacturers reported higher prices, while only 8% reported declines.

Meanwhile, employment indexes showed an improving labor market.

The employment index rose to 11.7 in January from 7.9 in the previous month, while the average workweek for January rose to 8.1 from 5.4.

About 29% of firms surveyed by the Philly Fed reported increased activity, while 26% expected declines.

Expectations of future activity diminished slightly in January. The index of future activity decreased to 28.7 from 33.4.

The Philly Fed index, like similar reports tracking activity in New York and Chicago, is of interest to traders primarily because they are seen as precursors to the national Institute for Supply Management factory survey due out in two weeks. In December, the ISM manufacturing fell to 54.2% from 58.1% in the previous month.

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