The numbers: The Philadelphia Federal Reserve’s index of manufacturing conditions rose by 8 points in January to 23.2, showing businesses are still growing despite the coronavirus omicron outbreak and persistent labor and supply shortages.

Economists surveyed by the the Wall Street Journal expected the index to rise to 18.6. Any reading above zero indicates that businesses are expanding.

“Responding firms remained generally optimistic about growth over the next six months,” the Fed said.

The increase in the Philadelphia Fed index told a very different story than a similar survey of businesses in New York that turned negative in January for the first time in 20 months.

“The economic hit to the New York area from Omicron in late December and early January was much more severe than in other parts of the country,” said chief economist Stephen Stanley of Amherst Pierpont Securities.

Big picture: Omicron has clearly taken a toll on the economy, but some parts of the country have fared better than others. And now cases are peaking or falling sharply in areas where the highly contagious strain first made big inroads.

Ongoing shortages of labor and supplies are bigger problems. These bottlenecks are starting to ease, the Philadelphia Fed survey indicated, but they aren’t going away soon. That’s adding stress on the economy and fueling the biggest runup in inflation in almost 40 years.

Key details: Manufacturers in the Philadelphia region said orders rose and employment held steady.

Companies said they are still paying sharply higher prices for supplies, however. Three-quarters of those surveyed reported paying higher prices.

It wasn’t quite as easy to pass price increases onto customers in the latest month. The price paid index was negative for the second month in a row.

Looking ahead: The early January regional Fed surveys released so far are signaling mixed performance to start the year,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “Factory activity remains vulnerable to disruptions from infections that impact labor supply and disrupt supply networks.”

Market reaction: The Dow Jones Industrial Average

and S&P 500

rose in Thursday trades. Stocks have retreated recently as interest rates have risen. Higher yields tend to hurt equities.

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By MD Abdullah

Abdullah is a former educator, lifelong money nerd, and a Plutus Award-winning freelance writer who specializes in the scientific research behind irrational money behaviors. Her background in education allows her to make complex financial topics relatable and easily understood by the layperson. She is the author of four books, including End Financial Stress Now and The Five Years Before You Retire.

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