Manufacturing conditions in the Philadelphia region contracted modestly in January, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday.

The Philly Fed said its diffusion index for current activity increased to a negative 3.5 in January from a negative 10.2 in December, although a negative reading indicates a contraction in regional manufacturing activity.

Despite the increase, the index remained negative for the fifth consecutive month. Economists had expected the index to rise to a negative 4.0.

The increase by the headline index was partly due to a turnaround in shipments, as the shipments index climbed to a positive 9.6 in January from a negative 2.1 in December.

The new orders index also rose to a negative 1.4 in January from a negative 11.1 in December, while the unfilled orders index increased to a negative 8.8 from a negative 17.6.

The Philly Fed also said the prices paid index increased to a negative 1.1 in January from a negative 8.3 in December, while the prices received index climbed to a negative 2.8 from a negative 8.5.

Meanwhile, the report showed a downturn in employment, with the number of employees index dropping to a negative 1.9 in January from a positive 2.2 in December.

The Philly Fed also said the indicators for future conditions remained positive overall but suggested a continuing deterioration in confidence about manufacturing growth for the first half of 2016.

The diffusion index for future general activity fell to 19.1 in January from 24.1 in December, hitting its lowest level since November of 2012.

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