Manufacturers responding to the February Business Outlook Survey reported declines in activity this month. Following reported growth in late 2012, indicators for general activity and new orders have now registered negative readings for the past two months. However, indicators for shipments and employment were slightly positive this month. The survey’s broad indicators of future activity edged higher this month.
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a reading -5.8 in January to -12.5 this month (see Chart).* The demand for manufactured goods also showed slight declines this month: The new orders index declined from a reading of -4.3 in January to -7.8 in February. Despite negative readings for general activity and new orders, the shipments index showed improvement: The index remained positive and edged slightly higher to 2.4. The percentage of firms reporting increased shipments (25 percent) was slightly greater than the percentage reporting declines (22 percent).
Labor market conditions showed signs of stabilizing this month. The employment index increased from -5.2 in January to 0.9 this month, its first positive reading in eight months. The percentage of firms reporting employment increases (15 percent) narrowly exceeded the percentage reporting decreases (14 percent).
The price indexes suggest continued moderation in price pressures this month. For the second consecutive month, the prices received index was slightly negative. The percentage of firms reporting lower prices for their own manufactured goods (9 percent) was nearly matched by the percentage reporting higher prices. With regard to purchased inputs, 13 percent of firms reported paying higher prices for inputs, compared with 20 percent last month. The prices paid index fell for the third consecutive month and, at 8.9, is now at its lowest reading in eight months.
The survey’s future indicators suggest that firms expect recent declines to be temporary. The future general activity index increased from a reading of 29.2 to 32.1, its third consecutive monthly increase (see Chart). The percentage expecting increases in activity over the next six months (47 percent) exceeded the percentage expecting decreases (15 percent). The indexes for future new orders and shipments showed a mixed pattern this month. The future new orders index increased 6 points, while the future shipments index fell 9 points. The future employment index improved modestly, increasing from 10.7 to 14.9. Twenty-five percent of firms expect to increase employment over the next six months; 10 percent expect to decrease it.
In special questions this month, firms were asked about their expectations for production growth for the first quarter (see Special Questions). Nearly 54 percent of the firms expect increases in production in the first quarter; 25 percent expect decreases. Nearly 47 percent of the firms said first quarter production growth would represent an acceleration in growth (only 9 percent characterized it as "significant acceleration"; 38 percent said the expected growth represented "some acceleration").
The February Business Outlook Survey indicated weakness in the region’s manufacturing sector this month. Firms reported decreases in overall activity and slight declines in new orders. A slight rise in shipments was one positive sign, along with an apparent stabilization of labor market conditions. Firms reported a continued trend of moderation in price pressures. Responses suggest that firms expect declines to be short-lived, since first quarter production is expected to rise and orders and shipments are expected to increase over the next six months.
Expected First Quarter Production Growth
|Increase of more than 5%||
|Increase of 3-5%||
|Increase of less than 3%||
|Decrease of less than 3%||
|Decrease of 3-5%||
|Decrease of more than 5%||
Average growth expected for all firms: 0.9%
Average growth for firms attributed to seasonal factors*: 1.6%
Average growth attributed to change in conditions*: 0.4%
|Change in business conditions||32.4%|
|* Calculation based on responses to question 3.
Percentages may not add to 100 percent because not all firms answered all questions.
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