Philly Fed Strengthens More Than Expected in December

By Jon C. Ogg Updated Jan 12, 5:14AM EST · Published Dec 21, 10:35AM EST

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Philly Fed Strengthens More Than Expected in December — © Thinkstock

The Federal Reserve Bank of Philadelphia has released its final manufacturing report of 2017. December’s regional Manufacturing Business Outlook Survey suggests that the regional manufacturing activity continued to improve in December.

The diffusion index for current general activity increased to 26.2 in December from 22.7 in November. Dow Jones was calling for the December reading to be just 21.8.

Nearly 41% of the firms indicated increases in activity this month, and that reading is up from 35% in November. Also shown was that the current new orders index and the shipments index both improved. Delivery times and unfilled orders indexes remained positive, but moderated, suggesting longer delivery times and increases in unfilled orders.

The percentage of firms reporting lower inventories was 19%, up from 17% in November.

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Most of the broad indicators reflected firms’ expectations for the next six months improved modestly this month. The diffusion index for future general activity increased from 50.1 in November to 53.5 this month. There were 42% of the firms expecting increases in employment over the next six months, and just 9% expecting decreases in employment.

The survey’s prices paid indicator suggested moderated cost pressures in December. Nearly 26% of the firms reported higher input prices this month, down from 39% in November. The prices received index, however, increased modestly from 8.6 to 11.3. Nearly 16% of the firms reported higher prices for their own manufactured goods this month, up slightly from 14% last month. And firms expect their highest cost increases to be around health benefits. The report said:

The responses indicate that the largest average annual increase is expected to be for health benefits (7.1 percent). Wages are expected to increase by an average of 2.7 percent, while nonhealth benefits are expected to rise 2.2 percent. The costs of raw materials and energy are expected to increase by an average of 3.3 percent and 1.3 percent, respectively. The firms were also asked how the expected cost increases for 2018 will compare with this year’s cost changes. For all categories of expenses, the firms forecast, on balance, increases greater than in 2017.

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.