Philly Fed Index Rebounds Much More Than Expected In January

A report released by the Federal Reserve Bank of Philadelphia on Thursday showed a substantial acceleration in the pace of growth in regional manufacturing activity in the month of January.

The Philly Fed said its diffusion index for current activity soared to 26.5 in January after slumping to a revised 9.1 in December, with a positive reading indicating growth in regional manufacturing activity.

Economists had expected the Philly Fed Index to inch up to 12.0 from the 11.1 originally reported for the previous month.

The much bigger than expected increase by the headline index was partly due to a significant acceleration in the pace of growth in new orders, with the new orders index spiking to 30.0 in January from 1.9 in December.

The shipments index also jumped to 22.7 in January from 12.0 in December, while the number of employees index surged up to 22.5 from 5.6.

The report also showed a notably faster rate of price growth, as the prices paid index shot up to 45.4 in January from 24.9 in December and the prices receive index spiked to 36.6 from 16.1.

The Philly Fed said changes in future indexes were mixed, but levels remained positive, suggesting overall growth is expected to continue over the next six months.

The diffusion index for general activity over the next six months jumped to 52.8 in January from a revised reading of 43.1 in December.

“Looking ahead, manufacturing will stay on an upbeat track though we expect growth to soften as vaccines and the economy‘s reopening unleash pent-up demand for deeply-damaged services,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics.

He added, “The Biden administration’s American Rescue Plan will carry the economy through the soft patch that’s developed at the start of the year and bolster the recovery over the course of 2021.”

Last Friday, the New York Fed released a separate report showing activity in the regional manufacturing sector unexpectedly grew at a slower pace in the month of January.

The New York Fed said its general business conditions index slipped to 3.5 in January from 4.9 in December, while economist had expected the index to inch up to 6.0.

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