October 2011 Responses to the Business Outlook Survey this month suggest that regional manufacturing is showing signs of recovering, following several months of decline. The survey’s broad indicators for activity, shipments, and new orders recorded positive readings after two months in negative territory. Responding firms indicated that employment was slightly higher this month. The broadest indicator of future activity remained positive and showed marginal improvement over its reading last month. Indicators Suggest Improvement The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -17.5 in September to 8.7, the first positive reading in three months (see Chart). The current new orders index paralleled the rise in the general activity index, increasing 19 points and returning to positive territory. The shipments index also recorded a positive reading, increasing from -22.8 in September to 13.6 this month. Labor market conditions improved only slightly this month. Nearly 18 percent of the firms reported an increase in employment, but 17 percent reported a decrease. The current employment index remained slightly positive but decreased 4 points from its reading in September. The average workweek index increased notably from -13.7 to 3.1. However, the percentage of firms reporting a longer workweek (15 percent) was only slightly greater than the percentage reporting a shorter one (12 percent). Prices for Manufactured Goods Are Near Steady The percentage of firms reporting decreases in prices for their manufactured goods (15 percent) was slightly higher than the percentage reporting price increases (12 percent) this month. The prices received diffusion index decreased from a reading just above zero last month to -2.5. The majority of firms (69 percent) reported steady prices for their own manufactured products in October. Increasing costs were, on balance, slightly less widespread this month compared to last month. The prices paid diffusion index decreased 3 points. Nearly 31 percent of firms reported paying higher prices for inputs this month, and 11 percent reported lower prices. Six-Month Indicators Improve Indicators for future activity remained positive and strengthened moderately this month. The broadest indicator of future activity improved, increasing 6 points, and is now at its highest reading in six months (see Chart). The indexes for future new orders and shipments also improved modestly, increasing 5 points and 2 points, respectively. The index for future employment paralleled the increase in other future indicators, rising 3 points. The percentage of firms expecting to increase employment over the next six months (25 percent) is higher than the percentage expecting to decrease employment (11 percent). For this month's special questions, manufacturers were asked about changes in their workforce and the changing use of flexible workers over the past year (see Special Questions). The share of firms that increased their total workforce over the past year (46 percent) outnumbered those decreasing their workforce (24 percent), and the mix of employment has changed for many firms. For example, 74 percent of firms indicated that they used temporary or agency workers, and 36 percent of these firms indicated that they have increased the total share of these workers over the past year. Summary According to respondents to the October Business Outlook Survey, the region’s manufacturing sector is recovering, following several months of decline. The survey’s current indicators suggest an overall increase in the demand for manufactured goods in October, and activity and shipments were reported to be higher. Firms were slightly more optimistic about future growth overall, with all of the survey’s future indicators showing improvement over their levels in September. Special Questions (October 2011) 1. Has your total workforce decreased, increased, or stayed the same over the last year? Decreased 24.0% Stayed the same 29.1% Increased 45.6% No response 1.3% Total 100.0% 2. How has your mix (as a share) of total employees changed between the various categories of employees over the last year? Percentage That Use | Percentages (excluding nonresponses) This Type of Labor| | Not Decreased No Increased Total | Used Share Change Share | ----------------------------------------- Regular Full-Time 100.0 | 0.0 20.3 50.6 29.1 100.0 Regular Part-Time 73.0 | 27.0 10.8 51.4 10.8 100.0 Short-Term Workers 47.8 | 52.2 8.7 33.3 5.8 100.0 On-Call Workers 41.8 | 58.2 6.0 34.3 1.5 100.0 Temporary or Agency Workers 74.0 | 26.0 8.2 30.1 35.6 100.0 Independent Contract Workers 54.5 | 45.5 9.1 37.9 7.6 100.0 Summary of Returns October 2011 October vs. September Six Months from now vs. October Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Busines -17.5 30.3 47.6 21.6 8.7 21.4 39.1 44.8 11.8 27.2 Conditions New Orders -11.3 32.0 43.8 24.2 7.8 21.6 41.6 38.2 15.0 26.7 Shipments -22.8 34.6 44.4 21.0 13.6 25.2 40.4 41.8 13.4 27.1 Unfilled Orders -10.4 22.1 56.8 18.6 3.4 4.7 26.2 48.5 18.5 7.7 Delivery Times -7.0 14.4 70.3 15.0 -0.5 -4.8 14.6 64.7 16.0 -1.4 Inventories 10.2 17.7 55.1 25.4 -7.7 -14.1 21.6 42.0 26.0 -4.4 Prices Paid 23.2 30.6 58.1 10.6 20.0 36.3 51.4 35.4 6.7 44.7 Prices Received 0.9 12.2 69.3 14.7 -2.5 18.2 34.3 48.9 8.9 25.4 Number of Emp. 5.8 17.9 64.9 16.5 1.4 11.2 25.2 59.9 10.7 14.5 Avg. Emp. Wrkwk -13.7 15.0 68.7 11.9 3.1 7.4 23.2 62.9 13.5 9.7 Capital Ex. -- -- -- -- -- 5.5 26.7 46.6 14.4 12.3 Notes: (1) Items may not add to 100 percent because of omission by respondents. (2) All data are seasonally adjusted. (3) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (4) Survey data reflect information received through October 18, 2011.