While the Federal Reserve Bank of Philadelphia released a report on Thursday showing that regional manufacturing activity grew at a slightly faster rate in December, the index of activity in the sector rose by much less than expected.
The Philly Fed said its diffusion index of current activity edged up to 7.0 in December from 6.5 in November. A positive reading indicates an increase in regional manufacturing activity, but economists had expected the index to climb to 10.0.
A rebound by the new orders index contributed to the modest uptick by the headline index, with the new orders index climbing to 15.4 in December after tumbling more than fifteen points to 11.8 in November.
The report also showed a notable rebound by the shipments index, which jumped to 13.3 in December from 5.6 in November.
The number of employees index also edged up to 2.2 in December from 1.1 in November, although it remains well off the two-year high set in October.
On the other hand, the report said the unfilled orders index fell to a negative 5.0 in December from a negative 4.2 in the previous month.
The Philly Fed said the prices paid index also fell to 20.1 in December from 29.9 in November, while the prices received index crept up to 12.9 from 10.0.
Looking ahead, the bank said the survey's future indicators have moderated in the past two months but continue to suggest optimism among firms.
The future general activity index edged down to 44.0 in December from 45.8 in November, pulling back further off the ten-year high set in October.
Amna Asaf, an economists at Capital Economics, said, "Overall, the headline index remains at a decent level whereas, even after the latest rebound, the alternative Empire State index (released on Monday) is only just above zero."
The New York Fed said its general business conditions index rose to a positive 1.0 in December from a negative 2.2 in November. Economists had expected the index to climb to 4.5.
"Together, the two regional indices point to a modest drop back in the national ISM index in December," Asaf said. "We expect any decline to be very small, however, because the ISM index appears to be more influenced by larger exporters, who appear to be benefitting from the recovery in Europe."
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