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Business Outlook
Survey
March 2005
Activity in the region's
manufacturing sector continues to expand, but at a slower rate than in
February. Indicators for general activity, shipments, and employment show a
more moderate pace of growth. Firms continue to report a rise in prices for
inputs and for their own finished goods, although the survey's price indicators
have moderated from recent highs. The region's manufacturing executives were
slightly more optimistic this month than in February.
Manufacturing Expansion Continues
The diffusion index of current activity, the broadest
measure of manufacturing conditions, decreased from 23.9 in
February to 11.4 in March. This is its lowest reading in 20
months (see Chart). More firms reported
increases in activity (27 percent) than reported decreases
(15 percent). A large percentage (58 percent) reported no
change in general activity compared to February. The new orders
and shipments indexes remained positive this month, but the
new orders index increased two points, while the shipments
index fell nine points. Indicators for unfilled orders and
delivery times changed little from February.
The moderation in manufacturing activity this month is evident
in the responses about employment and hours worked. The percentage
of firms reporting increased employment was higher than that
reporting lower employment for the 18th straight month. But
the current employment index fell to its lowest reading in
16 months, and the current workweek index also fell to its
lowest level in four months.
In special questions this month, firms were asked about
the actual level of their inventories over the last three
months and the economic factors that influenced them (see
Special Questions). Firms reporting higher
levels of inventory (41 percent) exceeded those reporting
lower levels (27 percent). Of the firms reporting higher
levels, 32 percent replied that lower than anticipated sales
had a significant effect on inventories; 9 percent indicated
that expected higher energy prices had a slight impact on
the larger inventories, and 24 percent thought anticipated
higher material costs had a slight impact. Among firms reporting
lower inventories, 23 percent said that greater than anticipated
sales had been a significant factor.
Price Indexes Moderate
Although firms continue to report higher production
costs, the index for input prices fell notably again this
month: 36 percent of firms reported higher prices for inputs,
substantially lower than February (49 percent) and January
(67 percent). The diffusion index for prices paid is at
its lowest reading in 16 months.
Firms continue to report higher prices for their own manufactured
goods: 23 percent reported higher prices; 8 percent reported
lower. The diffusion index for prices received is at its
lowest reading in 11 months. Expectations about future prices
moderated this month. The future prices paid index decreased
21 points, and the future prices received index decreased
18 points.
Manufacturing Expansion Expected to Continue
Overall expectations for the next six months improved
slightly in March. The future general activity index increased
from 26.5 to 29.8, its highest point in three months but
still below readings for most of last year (see Chart).
Other future indicators showed similar improvement: the
future new orders index increased six points and the future
shipments index increased nine points. The future inventory
index increased notably, from -16.9 in February to 1.0 this
month.
The future employment index increased from 11.8 in February
to 21.5 in March. On balance, firms that expect average
work hours to increase slightly edged out those that expect
them to decrease. Firms' capital spending plans have shown
some improvement in recent months. The future capital spending
index rose to its highest point since September 2000.
Summary
Indicators continue to point to expansion of the region's
manufacturing sector, although indicators for general activity,
shipments, employment, and work hours fell from their readings
in February. Firms continue to report higher costs for inputs
and manufactured goods this month, but the survey's price
indexes moderated from their recent highs. Most broad indicators
of future conditions edged higher this month, with the outlook
for employment and capital spending showing notable improvement.
| Special Questions (March
2005) |
Over the past three months
has your actual level of inventories:
|
|
Increased |
40.5% |
|
|
Decreased |
27.4% |
|
|
Not Changed |
32.1% |
|
|
Total |
100.0% |
|
To what extent have any of the factors below
influenced your actual level of inventories?
| |
For those
reporting increases: |
|
Significant |
Slight |
No Effect |
| Sales of products less than
anticipated |
32.4% |
8.8% |
58.8% |
| Sales of products greater than
anticipated |
14.7% |
20.6% |
64.7% |
| Anticipation of higher energy costs |
0.0% |
8.8% |
91.2% |
| Anticipation of lower energy costs |
0.0% |
0.0% |
100.0% |
| Anticipation of higher material
costs |
26.5% |
23.5% |
50.0% |
| Anticipation of lower material costs
|
0.0% |
5.9% |
94.1% |
| Other |
11.7% |
5.9% |
82.4% |
| |
|
| |
For those
reporting decreases: |
| |
Significant |
Slight |
No Effect |
| Sales of products less than
anticipated |
9.1% |
9.1% |
81.8% |
| Sales of products greater than
anticipated |
22.7% |
22.7% |
54.6% |
| Anticipation of higher energy costs |
0.0% |
13.6% |
86.4% |
| Anticipation of lower energy costs |
4.5% |
4.5% |
91.0% |
| Anticipation of higher material costs |
27.3% |
13.6% |
59.1% |
| Anticipation of lower material costs
|
0.0% |
9.1% |
90.9% |
| Other |
13.6% |
0.0% |
86.4% |
Summary of Results Table |
Chart
Text version
Release, tables, and chart (pdf
format)
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Business Outlook Survey Page
Requests for information or comments about the
Business Outlook Survey can be sent to mike.trebing@phil.frb.org
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