Philly Fed index rises more than expected in January

Manufacturing conditions in the Philadelphia region improved much more than expected in January, according to a survey released on Thursday.

The Philadelphia Fed index for current manufacturing activity rose to 17.0 from a revised 9.1 in December, comfortably beating expectations for a reading of 10.0.

More than 30% of manufacturers reported increases in overall activity, while 13% reported decreases.

The new orders index rose to 21.3 from 13.1 in December, marking its highest reading in six months. Meanwhile, the current shipments index fell one point to 11.4. The unfilled orders index fell to 5.4 this month from 9.1 in December, while the inventories index slid to -7.6 from 2.6 and the prices paid gauge declined to 32.7 from 38.9.

The diffusion index for future general activity edged up to 31.2 from a revised 29.9 in December, with over 46% of firms expecting a rise in activity over the next six months and 15% expecting a drop.

Pantheon Macroeconomics said: "The headline is a big surprise given the recent sharp drops in the ISM manufacturing index and the Empire State index earlier this week. Over time, all these measures trend together, and the Philly Fed is now an outlier to the upside. It will fall over the next few months under pressure from China’s underlying slowdown and the trade war.

"The January details show new orders rising to a six-month high of 21.3 from 13.3, but shipments, inventory and employment all fell, with the latter hitting a 16-month low. In short, the headline is not a representative signal of the state of manufacturing, either now or over the next few months."