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Manufacturing expands at slower pace in Philadelphia region as hiring, orders fall

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WASHINGTON — Manufacturing in the Philadelphia region grew at a much slower pace in December compared with the previous month. But the drop came after factory activity reached its highest level in 21 years in November.

The Federal Reserve Bank of Philadelphia said Thursday that its index of regional factory activity dropped to 24.5 this month from 40.8 in November. Last month's reading was the highest since December 1993. Any figure above zero indicates expansion.

The data indicates that regional manufacturing is still growing at a healthy clip, despite this month's slowdown, and helping to drive a broader economic expansion. The survey found that factories are hiring, but at a much slower pace. Measures of new orders and shipments also fell.

The survey covers manufacturing in Pennsylvania, New Jersey and Delaware.

Manufacturers expect to hand out only modest wage increases this year, the Philly Fed survey found. Regional firms project that they will boost pay just 2.3 percent in 2015, not far above the current inflation rate of 1.3 percent.

One reason raises will likely be limited: Manufacturers expect health care costs to soar 8.2 percent. They are more optimistic about other costs. On average, they expect energy costs to drop 0.4 percent next year and see most other raw material costs rising slightly.

A similar report from the New York Fed on Monday found that manufacturing in that state actually shrank this month, for the first time in nearly two years. But that also came after the Empire State index reached a five-year high in September.

Nationwide, most recent reports suggest that U.S. manufacturing is picking up. Factory output rose 1.1 percent in November, fueled by big gains in auto production, the Federal Reserve said Monday. U.S. factory production has now passed its pre-recession peak.

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