Manufacturing in the Philadelphia region expanded in December at the fastest pace in eight months as orders picked up.

The Federal Reserve Bank of Philadelphia’s general economic index increased to 10.3 from 3.6 last month. Economists forecast the gauge would rise to 5, according to the median estimate in a Bloomberg News survey. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

Factories may see a boost in demand from U.S. companies seeking to rebuild inventories that were drawn down in the third quarter. At the same time, the risk of recession in Europe and slowing growth in Asia may limit shipments from American manufacturers.

Economists’ estimates in the Bloomberg survey ranged from zero to 12.

Today’s report showed the Philadelphia Fed’s new orders measure climbed to 9.7, also the highest since April, from 1.3. The shipments gauge decreased to 6.7 from 7.3 last month.

The employment index in the Philadelphia Fed report eased to 10.7 from 12 last month. A measure of the average workweek decreased to 2.5 from 11 in November.

More factories reported declining inventories, pushing the gauge down to the lowest level since September 2010, which may encourage a pickup in production.

Another report today from the Fed showed industrial production in the U.S. unexpectedly dropped in November for the first time in seven months. Output at factories, mines and utilities declined 0.2 percent after a 0.7 percent gain in October.

Factory Production

Factory production, which makes up 75 percent of the total, decreased 0.4 percent, also the first decline since April.

Manufacturing in the New York region in December expanded the most in seven months as measures of employment and orders improved, another report showed. The Federal Reserve Bank of New York’s general economic index rose to 9.5 from 0.6 in November.

The labor market is showing signs of improvement. The number of applications for unemployment benefits unexpectedly dropped last week to the lowest level in three years. Jobless claims declined by 19,000 to 366,000 in the week ended Dec. 10, Labor Department figures showed today in Washington.