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January 2010 Business Outlook Survey

Survey Press Conference

Listen to the press conference for this month's survey. Audio Interview

The region's manufacturing sector continues to show improvement, according to firms polled for this month's Business Outlook Survey. Indexes for general activity, new orders, and shipments all remained positive this month, although each fell back somewhat from their revised readings in December. Also indicative of improvement, for the second consecutive month, the percentage of firms reporting increases in employment was higher than the percentage reporting declines. Overall, expectations improved in January, and firms remain generally optimistic about growth over the next six months.

Indicators Suggest Growth

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a revised reading of 22.5 in December to 15.2 this month.* The index has now remained positive for five consecutive months (see Chart). Indicators for new orders and shipments suggest continued growth this month, but they also declined somewhat from their December readings. The current new orders index, which has remained positive for six consecutive months, decreased 5 points. The current shipments index fell 4 points. The current inventory index, although still negative, increased 4 points, to its highest reading in 26 months. Indicators for unfilled orders and delivery times edged higher and are both positive, suggesting stronger economic conditions.

Labor market conditions have been stabilizing in recent months, and for the second consecutive month, the percentage of firms reporting an increase in employment was higher than the percentage reporting declines. The current employment index increased 2 points, to its highest reading since February 2008. The workweek index fell back 2 points but has now been positive for three consecutive months.

Most Firms Report Steady Prices, Despite Higher Costs

Respondents have been reporting higher costs for inputs in recent months. The prices paid index, which showed a notable increase of 14 points last month, fell back 3 points. But over one-third of firms reported higher prices paid, while less than 1 percent reported lower prices paid. On balance, however, firms reported near-steady prices for their own manufactured goods. The largest percentage, 85 percent, reported no change in the prices of their manufactured goods. The percentage of firms reporting higher prices (9 percent) was nearly offset by the percentage reporting lower prices (6 percent).

Manufacturers' Forecasts Improve

The future general activity index remained positive for the 13th consecutive month and increased notably from a revised reading of 35.9 in December to 43.3 (see Chart). Indexes for future new orders and shipments also improved this month, increasing 12 points and 6 points, respectively. For the ninth consecutive month, the percentage of firms expecting employment to increase over the next six months (28 percent) exceeded the percentage expecting declines (14 percent). Firms also forecast increases in inventories, unfilled orders, and delivery times.

In this month's special questions, firms were asked to characterize demand for their products over the past three months (see Special Questions). The improvement in manufacturing was evident in their responses, since the percentage of firms indicating an increase in demand was higher than the percentage indicating a decrease. Nearly 35 percent of firms indicated that demand had increased modestly over the last three months, and 7 percent indicated significant increases in demand. Only 15 percent indicated modest declines, while 7 percent reported significant decreases. When asked to compare current demand with what was expected three months ago, 26 percent of firms indicated that demand is greater than expected; 17 percent indicated it is less than expected. Firms were nearly evenly divided in their responses to a question about whether their forecast for the first half was more certain or less certain than six months ago.

Summary

According to respondents to the January Business Outlook Survey, manufacturing activity is still rising, even though some measures fell back somewhat from their readings at year-end. Special questions corroborated reported improvement in demand for manufactured goods in recent months. Firms expect continued growth over the first half of 2010, and most indicators for future growth showed improvement this month.

Special Questions (January 2010)

1. Over the past three months how would you characterize the underlying demand for your manufactured products? Exclude any purely seasonal effect.
Percentage
Increase significantly 7.4%
Increase modestly 34.6%
No change 33.3%
Decrease modestly 14.8%
Decrease significantly 7.4%
Percentages may not add to 100 percent because some firms did not respond to every question.
2. How does the current underlying demand for your products compare to what you expected three months ago?
Percentage
Less than expected
17.3%
About what was expected 55.6%
Greater than expected 25.9%
Percentages may not add to 100 percent because some firms did not respond to every question.
3. How would you characterize the level of certainty regarding your forecast for business growth over the next six months?
Percentage
Less certain than six months ago 23.5%
No difference from six months ago 43.2%
More certain than six months ago 24.7%
Percentages may not add to 100 percent because some firms did not respond to every question.

Return to the main page for the Business Outlook Survey.

  • * The survey's annual historical revisions, which incorporate new seasonal adjustment factors, were released on January 14, 2010. The full set of revised historical data is available.

View Complete Writeup

A complete writeup of this survey, including all tables, is available in PDF format.

January 2010 PDF

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Questions?

Questions about the Business Outlook Survey and its historical data can be addressed to Mike Trebing. E-mail