Growth around Philadelphia unexpectedly cooled in early May, but so did the rate of recent prices increase, the Federal Reserve Bank of Philadelphia said in a monthly survey Thursday.

The survey's main measure of manufacturing conditions, the diffusion index of current activity, fell to 7.3 this month from 25.3 in April. The index has been positive and indicating economic expansion for 24 consecutive months, but May's reading is the lowest since June 2003.

Economists had been expecting a reading of about 18 in the latest period.

"Activity in the region's manufacturing sector continued to expand, but at a slower rate than in April," according to the so-called Philly Fed report. "Indicators for general activity, new orders, shipments, and employment remained positive but fell from their readings last month."

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The survey's index for future prices paid fell 12 points, while the future prices received index lost 21 points.

"Firms continued to report a rise in prices for inputs and for their own finished goods, although the survey's price indexes fell."

Of the firms answering surveys, 26% reported increased business activity while 19% reported decreases. The rest saw no change compared with April. Both the new orders and shipment indices reported declines, although they stayed positive.

The index of production costs also stayed above zero, indicating an increase, although the rate of increase was 20 points lower in early May than April. Twenty-two percent of firms surveyed said they were charging higher prices for their own manufactured goods, while 6% were charging less.