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Philly Fed Index Falls To Six-Month Low In November

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Growth in Philadelphia-area manufacturing activity has slowed by much more than anticipated in the month of November, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday, with the index of activity in the sector falling to a six-month low.

The Philly Fed said its diffusion index of current activity tumbled to 6.5 in November from 19.8 in October. While a positive reading indicates continued growth in regional manufacturing activity, economists had expected a much more modest decrease to a reading of 15.5.

With the bigger than expected decrease, the Philly Fed index fell to its lowest level since hitting a negative 5.2 in May.

The report showed that the readings on new orders, shipments, and employment all remained positive in November but fell sharply compared to the previous month.

The new orders index plummeted to 11.8 in November from 27.5 in October, while the shipments index plunged to 5.6 from 20.4.

The number of employees index also slid to 1.1 in November from 15.4 in October. The Philly Fed said just 13 percent of firms reported increases in employment.

Meanwhile, the report showed a mixed picture regarding inflation. While the prices paid index jumped to 29.9 in November from 21.7 in October, the prices received index fell to 10.0 from 14.2.

The Philly Fed also said its future general activity index fell to 45.8 in November from 60.8 in October, although more than 55 percent of the firms still expect increases in activity over the next six months.

Mei Li, Economic Analyst at FTN Financial, said, "Both the Philly Fed index and Empire State weakened in November."

"The ISM manufacturing reached a 30-month high in October, but is likely to lose momentum at year-end," she added.

Last Friday, the New York Federal Reserve said its general business conditions index fell to a negative 2.2 in November from a positive 1.5 in October, with a negative reading indicating a contraction in manufacturing activity.

The negative reading for the general business conditions index came as a surprise to economists, who had expected the index to climb to 5.5.

With the unexpected decrease, the general business conditions index fell to its lowest level since hitting a negative 7.8 in January.

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