FXstreet.com (Barcelona) - Manufacturing activity in the Philadelphia region weakened sharply in January as general activity and new orders decreased sharply from the previous month, according to the survey from the Federal Reserve Bank of Philadelphia.

The current activity index fell sharply from revised -1.6 in December to -20.9 in January, the lowest reading since October 2001. But that was not the unique index to post losses, demand for manufacturing goods fell to -15.2 from 12.0 in December, below 0 for the first time in 12 months.

,According to Ian Shepherdson, Chief U.S. Economist at High Frequency Economics, Ltd, the most worrisome aspect of the report is that the decrease on activity has reflected in the orders index: The really grim news is that the drop in the headline index is reflected in the orders index, down to a six-year low of -15.2, and in smaller declines in all the other sub-indexes. The collapse in the Philly Fed has been very rapid - just two months ago it was at 7.5 - and it is not always a reliable indicator of the survey which really counts, the ISM. If the ISM moves in line with the Philly, the headline index will drop to 43, which is consistent with falling GDP, just. This is very alarming, because we had pinned our hopes on the relative strength of the corporate sector offsetting some of the housing hit. This is bad.

The current shipments index decreased from 15.0 to -2.3 in January. The current employment index dropped to -1.5 in January from 3.8 in December, and the average workweek fell to -16.1 in January from 7.3 in December.