(Reuters) – A gauge of manufacturing activity in the U.S. Mid-Atlantic region shot up by the most in about four-and-a-half years in January, with new orders and shipments both surging, a potential indication that the factory sector’s long slump may be ending.
The Federal Reserve Bank of Philadelphia said on Thursday that its monthly manufacturing index rose to 44.3, its highest since April 2021, from a revised minus 10.9 in December. The net increase was the largest since June 2020 after factories began reopening from the initial wave of COVID-19 shutdowns and was the second largest increase on record.
The result far outstripped the median forecast among economists polled by Reuters, which was for a reading of minus 5.0. Negative readings indicate a contraction in activity.
The report’s new orders index rose to 42.9, its highest since November 2021, while the shipments index climbed to 41.0, its highest since October 2020. Employment levels also rose to a six-month high.
The U.S. manufacturing sector has been struggling for the better part of three years after the Federal Reserve began raising interest rates in early 2022 to beat back the stiffest inflation in a generation. The rise in borrowing costs cut into demand and investment.
January’s report, though, dovetails with a number of other surveys of business sentiment in the two months since Donald Trump was elected U.S. President. Trump takes office next week with promises to cut taxes and regulation, and also to crack down on immigration and impose a broad range of tariffs. A wider survey from the Fed released on Wednesday showed businesses were optimistic about the outlook but also concerned by the risks that tariffs and immigration restrictions posed to prices and labor availability.
Inflation is already proving harder than expected for the Fed to bring back to its 2% target, even before Trump formally unveils his plans, many of which are expected to be announced as early as his inauguration day, Jan. 20. Indeed, the Philly Fed’s prices paid index measuring production input costs rose to a two-year high in January.
(Reporting By Dan Burns; Editing by Chizu Nomiyama)
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