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July 2011 Business Outlook Survey

Responses to the Business Outlook Survey suggest that regional manufacturing activity remained weak in July. The survey's indicators for activity and new orders, which had turned negative last month, recovered somewhat but are at very low positive readings. Firms indicated that employment grew modestly while the average workweek lessened. Indexes for prices show a continuing trend of moderating price pressures. The broadest indicator of future activity improved markedly this month, rebounding from its lowest reading in 31 months in June.

Indicators Suggest Activity Is Near Steady

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased to 3.2 from -7.7 (see Chart). The demand for manufactured goods, as measured by the current new orders index, improved from last month but suggests flat demand: The index rose 8 points to a reading of zero, and the percentage of firms reporting increases was equally matched by the percentage reporting decreases (28 percent). The current shipments index remained slightly positive but virtually unchanged from June.

Firms' responses suggest a slight improvement in the labor market compared to June. The current employment index increased 5 points and remained positive for the 11th consecutive month. About 22 percent of the firms reported an increase in employment, up slightly from 14 percent last month. Slightly more firms reported a shorter workweek (21 percent) than re-ported a longer one (15 percent) and the workweek index was down 7 points.

Price Pressures Show Further Moderation

Diffusion indexes for prices paid and prices received were lower this month and suggest a continued trend of moderating price pressures. The prices paid index declined 2 points, following a sharp drop of 22 points last month. Still, one-third of the firms reported higher prices for inputs this month, and 8 percent reported a decline. Only slightly more firms reported a rise in prices for manufactured goods (18 percent) than reported declines (17 percent). The prices received index decreased 3 points, its third consecutive monthly decline.

Six-Month Indicators Rebound

The survey's indicators for future activity showed notable improvement this month. The future general activity index increased 21 points but still remained well below average readings in the first quarter (see Chart). The indexes for future new orders and shipments also increased, 20 and 16 points, respectively. The index for future employment increased more moderately, by 5 points, and also remains well below average readings in the first quarter. More firms expect to increase employment over the next six months (30 percent) than expect to decrease employment (20 percent).

In special questions this month, firms were asked about recent trends in demand for their manufactured goods and to characterize the reasons for any slowing. Slightly over half of the firms indicated that demand had increased recently, while 26 percent indicated that demand had slowed. Of those firms that experienced some slowing, the most frequently cited reasons were increased uncertainty and higher prices for energy, commodities, and transportation. Firms were also asked about their forecast for production in the third quarter compared to the second quarter. The median forecast called for a meager 0.5 percent increase in production, with a large share of firms situated at either end of the range of growth rates. Over 21 percent of the firms expected increases of greater than 4 percent and 18 percent expected decreases of more than 4 percent.

Summary

According to respondents to the July Business Outlook Survey, the region's manufacturing sector remained weak in July. The survey's indicators suggested flat demand for manufactured goods this month, while shipments and employment grew only slightly. Price measures suggested continued moderation in price pressures. The broadest indicators for future activity rebounded after falling sharply last month and firms are somewhat more optimistic about their hiring plans over the next six months.

Special Questions (July 2011)

1. Over the past two months, how would you characterize the demand for your manufactured products?
 %subtotals
Increased significantly9.450.6
Increased moderately41.2
No change20.0 
Decreased moderately21.225.9
Decreased significantly4.7
2. If you have experienced a recent slowing in growth in demand, to which factors do you attribute this? *
Increased economic uncertainty82.4 
Higher prices for energy, commodities, & transportation44.1 
Seasonal factors35.3 
The ending of fiscal stimulus spending11.8 
3. What percentage change in your firm's production do you anticipate in the third quarter of 2011 over the second quarter?
Increase of more than 4%21.249.5
Increase of 3-4%2.4
Increase of 2-3%5.9
Increase of 1-2%15.3
Increase of less than 1%4.7
No change10.6 
Decline of less than 1%2.337.7
Decline of 1-2%7.1
Decline of 2-3%9.4
Decline of 3-4 %1.2
Decline of 4% or more17.7
Median increase: 0.5 %  

*Percentages add to more than 100% due to respondents choosing more than one factor.

Return to the main page for the Business Outlook Survey.

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

July 2011 PDF

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Questions?

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