Business Outlook Survey
October 2006
The pace of activity in the region's manufacturing sector was generally steady
in October, according to firms surveyed for this month's Business Outlook
Survey. Although the index for general activity was slightly negative this
month, indicators for new orders, shipments, and employment suggest some growth.
Firms continued to report a rise in prices for inputs, although these cost
increases were less widespread than in previous surveys. The region's
manufacturing executives were more optimistic about future activity, with most
indicators rebounding from their six-year lows in September.
Indicators Suggest Little Growth
The survey's broadest measure of manufacturing conditions, the diffusion index
of current activity, edged slightly lower, from -0.4 in September to -0.7 this
month (see Chart). Twenty- two percent of the firms reported increased activity
this month, but 23 percent reported decreased activity. The new orders and
shipments indexes rebounded from their slightly negative readings in the
previous month: The new orders index increased 15 points, and the shipments
index increased 12 points. However, both the delivery time and unfilled orders
indexes fell; the readings have been negative for two consecutive months.
Only moderate growth in manufacturing is suggested in replies about employment
this month. The current employment index fell a modest one point from its
reading in September and remains at a relatively low level. Twenty-two percent
of the firms reported increases in employment; 13 percent reported reductions.
However, more firms reported decreases in the workweek (18 percent) than
reported increases (16 percent), and the average workweek index fell seven
points.
Price Pressures Moderate
Respondents reported higher costs for inputs again this month, but increases
were not as widespread as in previous surveys. The prices paid index remained at
a relatively high reading of 32 but fell six points from September (the index
has now fallen for three consecutive months). Forty-two percent of the firms reported higher input prices; 10 percent reported lower input prices.
Twenty-two percent of the firms reported higher prices for final manufactured
goods, down slightly from 27 percent last month. The prices received index edged
four points lower this month.
Six-Month Forecast Rebounds
Expectations for future manufacturing growth improved notably this month,
following a sharp decline last month. Indicators for future activity, new
orders, shipments, and employment all rose from their September readings. The
future general activity index increased from -0.2 to 16.7 (see Chart);
paralleling this increase, the indexes for future new orders and shipments both
rose about 20 points. The future employment index increased seven points.
Special Questions
In special questions this month, firms were asked about the most serious
problems facing their business (see Special Questions). The highest ranked
problems (categories checked as relatively major) were finding qualified workers
and the cost of benefits. The categories that were higher than when the question
was asked last year were finding qualified workers, benefit costs, and low
demand for products.
Summary
Growth in the region's manufacturing sector is steady or up slightly this month.
Although the indicator for general activity suggests no overall growth, indexes
for new orders, shipments, and employment suggest a slight improvement from last
month. According to responses from this month's survey, input price pressures
are still strong but are less pervasive than in the previous month. The share of
firms reporting higher prices for their manufactured goods was down slightly.
Indicators for the next six months suggest that firms are more confident about
future conditions than they were in September.
|
Special Questions (October 2006)
To what degree does each of the following pose a current problem for your firm? |
|
|
Relatively
Major Problem* (4)
%
|
3
% |
2
%
|
Relatively Minor Problem (1)
% |
|
Finding Qualified
Workers |
36.9 |
31.0 |
17.9 |
14.3 |
| Labor Costs-Benefits |
33.3 |
38.1 |
19.0 |
9.5 |
| Government Regulations |
21.4 |
25.0 |
35.7 |
17.9 |
Cost of Resources |
18.1 |
39.8 |
36.1 |
6.0 |
Taxes |
17.3 |
32.1 |
39.5 |
11.1 |
Foreign Competition |
16.5 |
14.1 |
29.4 |
40.0 |
Current Low Demand for Product |
15.9 |
22.0 |
22.0 |
40.2 |
High Rate of Capacity Utilization |
10.0 |
20.0 |
32.5 |
37.5 |
| Labor Costs-Wages |
7.1 |
31.0 |
42.9 |
19.0 |
Availability of Resources |
6.1 |
28.0 |
40.2 |
25.6 |
*Degree of concern decreases from 4 (major)
to 1 (minor). All Numbers are percentages.
|
Compared to Last Year: |
|
|
Greater
% |
Same
%
|
Less
% |
|
Finding Qualified
Workers |
43.2 |
7.4 |
49.4 |
| Labor Costs-Benefits |
42.0 |
2.5 |
55.6 |
| Government Regulations |
25.6 |
4.9 |
69.5 |
Cost of Resources |
35.0 |
6.3 |
58.8 |
Taxes |
21.8 |
0.0 |
78.2 |
Foreign Competition |
30.9 |
3.7 |
65.4 |
Current Low Demand for Product |
40.2 |
30.5 |
29.3 |
High Rate of Capacity Utilization |
13.9 |
21.5 |
64.6 |
| Labor Costs-Wages |
21.0 |
4.9 |
74.1 |
Availability of Resources |
17.7 |
6.3 |
75.9 |
Summary of Results Table | Chart
Business Outlook Survey Historical Charts
Release, tables, and chart
[PDF, 163 KB]
Text version
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Requests for information or comments about the Business Outlook Survey can be sent to: mike.trebing@phil.frb.org
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