Philadelphia-area manufacturing activity grew at a substantially slower rate in the month of December, the Federal Reserve Bank of Philadelphia revealed in a report on Friday.
The Philly Fed said its diffusion index for current activity tumbled to 15.4 in December after jumping to 39.0 in November, although a positive reading still indicates growth. Economists had expected the index to slump to 30.0.
With the much bigger than expected decrease, the Philly Fed Index fell to its lowest level since hitting 11.1 in December 2020.
The sharp pullback by the Philly Fed index reflected significant slowdowns in the pace of growth in both new orders and shipments.
The new orders index plummeted to 13.7 in December from 47.4 in November, while the shipments index plunged to 15.3 from 32.1.
Meanwhile, the number of employees index climbed to 33.9 in December from 27.2 in November, indicating an acceleration in the pace of job growth.
The report also showed the prices paid index slid to 66.1 in December from 80.0 in November, while the prices received index fell to 50.4 from 62.9.
Looking ahead, the Philly Fed said its future general activity and new orders indexes moderated but noted surveyed firms remained generally optimistic about growth over the next six months.
The diffusion index for future general activity slumped to 19.0 in December from 28.5 in November, hitting its lowest reading since February 2016.
“Manufacturers in the Philly Fed region look poised to maintain positive attitudes in 2022 as solid demand and a heavy backlog of orders keep them working in a high gear,” said Oren Klachkin, Lead U.S. Economist at Oxford Economics. “However stubborn supply-chain blockages will limit their ability to keep up with demand.”
On Wednesday, the New York Fed released a separate report unexpectedly showing a modest acceleration in the pace of growth in regional manufacturing activity in the month of December.
The New York Fed said its general business conditions index inched up to 31.9 in December from 30.9 in November. The uptick surprised economists, who had expected the index to pull back to 20.5.
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