Nov 20, 11:10 AM EST

Philly area factories growing by most in 21 years


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AP Photo/Matt Rourke

WASHINGTON (AP) -- Manufacturing in the Philadelphia region grew at the fastest pace in nearly 21 years, a sign that factory output may be picking up nationwide.

The Federal Reserve Bank of Philadelphia says its index of regional factory activity jumped to 40.8 in November from 20.7 in October. That is the highest level for the index since December 1993.

Thursday's report adds to other recent evidence that U.S. manufacturing is expanding modestly and helping boost economic growth. A measure of new orders soared and a gauge of shipments also rose. More firms in the area also said they were adding jobs.

Still, many economists said the jump in the index may be overstating the improvement among regional manufacturers. They expect the index will likely fall back next month.

Jim O'Sullivan, chief U.S. economist at High Frequency Economics, warned that the index "is just one, often-volatile regional survey." He noted that it averaged just 10.3 in the first half of the year. Any reading above zero indicates growth.

The survey covers manufacturing in Pennsylvania, New Jersey and Delaware. A similar report from the New York Fed on Monday also showed strong growth.

Other recent manufacturing data have been positive, but not nearly as much as the Philly Fed's report. The New York Fed's Empire State survey earlier this week found that manufacturers in that state expanded more quickly in November than the previous month, but the improvement was modest. Its index rose four points to 10.2, but remained below a five-year high of 27.5 in September.

Nationwide, factory output rose a modest 0.2 percent in October, according to a Federal Reserve report Monday. The increase was driven by higher demand for machinery, plastics, clothing and furniture. Auto production fell for the third straight month, even as sales have been strong.

Manufacturers in the Philly region do expect to step up hiring in the next 12 months. Nearly 56 percent of manufacturers said they planned to add jobs over the next 12 months, above the roughly 45 percent who planned to do so in January. The main reason they expect to boost hiring is because they expect healthy sales growth.

The survey also asked about the impact of President Obama's health care reforms on jobs. Seventy percent said the implementation of the reforms had had no effect. Yet 11.3 percent said it had caused them to cut full-time hiring and nearly 8 percent said it caused them to use more contract workers.

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Contact Chris Rugaber at http://Twitter.com/ChrisRugaber

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