Manufacturing activity in the Philadelphia area continued to improve in December, reaching its highest level since April 2005, according to a survey released Thursday by the Federal Reserve Bank of Philadelphia.

The broadest gauge in the bank's monthly Business Outlook Survey rose to 24.3 from 22.5 in November and now has been above zero for three straight months. An index level above zero indicates growth in manufacturing, while negative numbers reflect contraction. The index was at 25.5 in April 2005.

"All of the broad indicators remained positive and reflect an expansion of activity," the Fed said. "The demand for manufactured goods is showing continued improvement."

New orders, a key component of the overall manufacturing index, rose four points in December. Though another significant part, the index for shipments of finished products, declined this month, it remained above zero for the third consecutive month.

Also, the survey found, more manufacturers reported an increase in employment this month (17 percent) than reported a staffing decline (12 percent). More firms reported longer average number of work hours for their employees.

Signs of higher prices were more widespread in December than in previous months, as a growing number of manufacturers in the area said they were paying more for raw materials and charging more for their finished goods.

Meanwhile, the companies' overall outlook for the next six months rose to its highest level in nine months, and more firms told the Fed they expected to add to their workforces.

"The degree of confidence about future economic conditions continues to show improvement," the Fed said.

The Fed survey covered 85 manufacturers in the eastern two-thirds of Pennsylvania, the southern half of New Jersey, and throughout Delaware.

Contact staff writer Paul Schweizer at 215-854-2487 or pschweizer@phillynews.com.