After reporting an increase in business activity in late 2012, the manufacturing firms responding to the Philadelphia Federal Reserve’s Business Outlook Survey reported moderate declines in business activity in the month of January.
The Philly Fed released a report Thursday showing that its diffusion index of current activity fell to a negative 5.8 in January from a positive 4.6 in December, with a negative reading indicating a contraction in Philadelphia-area manufacturing activity.
The pullback into negative territory came as a surprise to economists, who had expected the index to drop to 6.0 from the 8.1 originally reported for the previous month.
Reflecting a decline in demand for manufactured goods, the new orders index fell to a negative 4.3 in January from a positive 4.9 in December.
The shipments index dropped to 0.4 in January from 14.7 in December. While the index remained slightly positive, the Philly Fed said it suggests no overall growth.
The report also showed that the employment index slid to a negative 5.2 in January from a negative 0.2 in December, indicating an acceleration in the pace of deterioration in labor market conditions.
On the inflation front, the prices paid index fell to 14.7 in January from 23.5 in December, while the prices received index tumbled to a negative 1.1 from a positive 12.4.
However, the Philly Fed said the survey’s future indicators suggest that firms expect the recent declines to be temporary.
The report showed that the future general activity index climbed to 29.2 in January from 23.7 in December, reflecting the second consecutive monthly increase.
Forty-three percent of the firms surveyed expect increases in activity over the next six months compared to the 14 percent that expect decreases.
On Tuesday, the New York Federal Reserve released a separate report showing that conditions for New York manufacturers continued to decline at a modest pace in January, with the index of regional manufacturing activity stuck in negative territory for the sixth consecutive month.
The New York Fed said its general business conditions index edged down to a negative 7.8 in January from a negative 7.3 in December, with a negative reading indicating a contraction in regional manufacturing activity.
The decrease by the general business conditions index came as a surprise to economists, who had expected the index to climb to 0.0.
by RTT Staff Writer
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