Philly Fed: Mid-Atlantic Factory Activity Improves in Dec.

NEW YORK – Manufacturing activity in the U.S. Mid-Atlantic region improved slightly in December, but new orders and the outlook for factory jobs slipped, according to the Philadelphia Fed's report published on Thursday.

The Philadelphia Federal Reserve Bank said its business activity index edged up to 12.6 in December from 11.5 in November, below Wall Street forecasts for a rise to 14.0.

A reading above zero points to growth in the region's manufacturing sector.

"It's a disappointing number, the index only marginally improved over the previous month," said David Sloan, analyst at 4CAST.

"It still suggests the manufacturing sector in the region is expanding at a reasonable pace, but it perhaps understates the true picture a bit," he said.

The dollar initially pared gains against the euro after the softer-than-expected report, while Treasuries reacted little.

The new orders index, a key indicator of future growth, fell to 8.2 from 12.7 in November, while the employment index fell to 9.4 from 19.1.

Inflation pressures eased a bit, in line with the decline in energy costs. A measure of prices paid by manufacturers eased to 49.0 from 56.8.

"Firms continued to report higher prices for inputs and manufactured goods, although a slight moderation in cost pressures was evident," the Philadelphia Fed said.

The regional survey is one of the first indicators of U.S. manufacturing eve the recovery from hurricane-depressed levels picked up steam.

A regional survey from the neighboring New York Federal Reserve showed manufacturing in the state jumped well above expectations. The "Empire State" index released earlier on Thursday rose to 28.74 in December, its highest this year, as new orders grew.

One bright note in the Philadelphia Fed survey was the outlook, with manufacturers sharply increasing their expectations for activity six months out. That index rose to 39.0, the highest reading in 12 months, from 29.2 in November.