Business Outlook Survey Releases (January 2008 - December 2008) December 2008 Conditions in the region's manufacturing sector continued to deteriorate this month, according to firms polled for the December Business Outlook Survey. All of the survey's broad indicators remained negative this month and at relatively low levels. Firms reported declines in input prices and the prices for their own manufactured goods this month. Consistent with the weakness in current activity, most of the survey's indicators of future activity slid further into negative territory, suggesting that the region's manufacturing executives expect continued declines over the next six months. Indicators Show Continued Declines The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, improved from -39.3 in No-vember to -32.9 this month. The index, which fell a dramatic 41 points in October, has remained near its current low reading for the past three months (see Chart). Evidence of continued weakness was also seen in the other broad indicators. The survey's new orders index remained at a low negative reading, although it increased six points, to -25.2. The survey's shipments index declined almost 10 points, to its lowest reading since February 2001. Indexes for unfilled orders and delivery times remained significantly negative this month and edged slightly lower. The current employment index fell for the third consecutive month, decreasing four points, to its lowest reading since September 1982. The percentage of firms reporting a decrease in employment (42 percent) was greater than the percentage reporting an increase (13 percent). The average workweek index fell notably, declining 12 points. Prices Continue to Decline Consistent with overall weakness, price pressures eased again this month. Forty-two percent of the firms reported paying lower prices for inputs; only 9 percent of the firms reported paying higher prices. The prices paid index fell three points, following a 38-point decline in November. The index has now fallen a dramatic 109 points over the past five months. Forty-three percent of firms reported lower prices for their own manufactured goods (compared to 27 percent in November); 6 percent reported higher prices. The prices received index dropped 22 points, to its lowest reading since the survey began in 1968. Firms are also expecting prices to decline over the next six months. Both the future prices paid and the future prices received indexes remained negative for the second consecutive month, falling 17 points and six points, respectively, to their lowest readings on record. Six-Month Indicators Deteriorate Area manufacturers' expectations for future conditions deteriorated further this month. The future general activity index decreased from -10.4, to -14.5 this month (see Chart). The index for future new orders declined three points; the future shipments index increased 12 points but remained negative. On balance, firms expect decreases in employment over the next six months: The future employment index fell five points and was negative for the third consecutive month. The capital spending index dipped 13 points—its third consecutive negative reading— suggesting a deterioration in the outlook for future growth. In this month's special question, firms were asked about their expectations for changes in various categories of input and labor costs for the upcoming year (see the Special Question). The largest annual increase is expected to be for health benefits (6 percent), followed by wages (1.6 percent), and nonhealth benefits (1.2 percent). Regarding nonlabor costs, all of the categories of expense were expected to decline in 2009: raw materials (-3.0 percent), intermediate goods (-0.8 percent), and energy (-0.4 percent). The dispersion of forecasts was the greatest for energy and other raw material costs and the least for total wage costs (nearly all of the forecasts for wages were within the category of 0 to 5 percent increase). For every category of costs the expected rate of change was lower than in the three previous survey years (in December of each year, when the survey question was asked). Summary According to respondents to the December survey, manufacturing in the region experienced continued declines this month. Indicators for activity, new orders, shipments, and employment were all substantially negative this month. Firms also reported lower prices for inputs and for their own manufactured products in December. Indicators for future business conditions fell again, suggesting that the region's manufacturing executives expect continued declines during the first half of next year. Special Question (December 2008) What percentage change in costs do you expect for the following categories in 2009? Energy Other Raw Intermediate Materials Goods Wages Health Nonhealth Benefits Benefits Increase > 10% 7.3 2.4 0.0 0.0 15.8 2.4 Increase of 7.5-10% 3.7 2.4 5.0 0.0 23.2 0.0 Increase of 5-7.5% 3.7 2.4 4.9 0.0 18.5 2.4 Increase of 2.5-5% 14.6 8.5 7.3 35.4 15.9 17.7 Increase of < 2.5% 6.1 11.0 12.2 24.4 4.9 19.5 Stay at current levels 17.1 12.2 31.7 32.9 14.6 50.0 Decline of < 2.5% 11.0 14.6 12.2 0.0 0.0 1.2 Decline of 2.5-5% 11.0 8.5 12.2 3.7 0.0 2.4 Decline of 5-7.5% 6.1 11.0 6.1 0.0 1.2 1.2 Decline of 7.5-10% 3.7 6.1 3.7 0.0 1.2 1.2 Decline of > 10% 9.8 15.8 1.2 0.0 0.0 1.2 Average -0.4 -3.0 -0.8 1.6 6.0 1.2 ________________________________________________________________________________ Previous estimates for: 2008 Avg. 4.9 3.8 2.8 3.1 7.2 2.4 2007 Avg. 4.5 4.1 2.5 3.4 8.1 3.6 2006 Avg. 8.4 5.6 4.2 2.7 9.6 3.1 Summary of Returns December 2008 | December vs November | Six Months from now | vs. December | Prev. |Prev. Diff. Inc. No ch. Dec. Diff. |Diff. Inc. No ch. Dec. Diff. Index Index |Index Index | General Busines -39.3 18.1 25.7 51.0 -32.9 | -10.4 23.4 30.8 37.9 -14.5 Conditions | | New Orders -31.4 23.5 27.7 48.8 -25.2 | -7.0 25.4 33.9 35.4 -10.0 | Shipments -18.8 22.3 26.7 51.0 -28.7 | -15.1 32.6 31.8 35.7 -3.1 | Unfilled Orders -29.1 6.1 55.5 38.4 -32.3 | -22.1 9.5 64.4 26.0 -16.5 | Delivery Times -20.6 2.6 71.3 25.4 -22.8 | -19.7 4.2 66.2 26.1 -21.9 | Inventories -19.6 19.9 28.2 51.1 -31.1 | -26.9 4.4 43.4 51.0 -46.6 | Prices Paid -30.7 8.5 48.6 41.7 -33.2 | -9.2 9.1 50.8 35.7 -26.6 | Prices Received -15.5 5.6 51.0 43.4 -37.8 | -13.8 10.3 52.8 30.6 -20.2 | Number of Emp. -25.2 12.9 45.1 41.6 -28.7 | -25.1 11.2 43.6 41.5 -30.2 | Avg. Emp. Wrkwk -19.7 8.3 48.1 39.7 -31.4 | -18.4 8.9 56.8 33.7 -24.8 | Capital Ex. -- -- -- -- -- | -9.0 11.0 47.4 32.7 -21.6 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 December 15, 2008 November 2008 Conditions in the region's manufacturing sector continued to deteriorate, according to firms polled for this month's Business Outlook Survey. Most broad indicators declined again in November, following sharp decreases in October. Input price pressures, which had been moderating over recent months, showed a marked decrease in November. Also, for the first time since 2003, more firms reported declines in the prices of their own manufactured goods than reported increases. Most of the survey's indicators of future activity slid further into negative territory this month, suggesting that the region's manufacturing executives expect continued declines over the next six months. Current Indicators Show Declines The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from -37.5 in October to -39.3 this month. This index, which fell a dramatic 41 points last month, is now at its lowest level since October 1990. Evidence of weakness was also seen in the other broad indicators this month. Demand for manufactured goods, as represented by the survey's new orders index, decreased one point, to a reading of -31.4. The survey's shipments index held steady at -18.8; this follows a decrease of 21 points last month. Indexes for unfilled orders and delivery times remained significantly negative and were little changed from October. The current employment index fell notably this month, declining seven points, to -25.2. The percentage of firms reporting a decrease in employment (38 percent) was greater than the percentage reporting an increase (13 percent). The average workweek index fell one point, and firms reporting shorter work hours outnumbered those reporting longer hours by 3 to 1. Prices Fall This Month Consistent with overall weakness, price pressures eased notably this month. Forty percent of the firms reported paying lower prices for inputs; only 9 percent reported paying higher prices (compared to 30 percent in October). The prices paid index fell 38 points and registered its first negative reading since July 2003. The index has now fallen a dramatic 106 points over the past four months. Price increases for firms' own manufactured goods also declined this month: The percentage of firms reporting lower prices for their own manufactured goods (27 percent) was higher than the percentage reporting higher prices (12 percent). The prices received index fell 21 points, also its first negative reading since July 2003. Six-Month Indicators Deteriorate Area manufacturers' expectations for future conditions deteriorated further this month. The future general activity index decreased from -4.2 in October to -10.4 this month (see Chart). Indexes for future new orders and shipments both fell three points, after declines of 48 and 55 points last month, respectively. On balance, firms expect decreases in employment over the next six months: The future employment index fell nine points and was negative for the second consecutive month. In this month's special questions, manufacturers were asked to provide a forecast for expected fourth-quarter production compared to the third quarter and whether, among other things, the increase or decrease reflects a change in business conditions (see Special Questions). Sixty-six percent of the firms indicated that production would decrease in the fourth quarter; 52 percent said the expected decrease was the result of a change in business conditions. The firms were also asked about changes in employment expected over the next six months. Sixty-nine percent of firms expect employment declines over the next six months. Layoffs were the most frequently cited method of achieving the planned reductions (51 percent of these firms). Summary According to the respondents to November's survey, manufacturing experienced continued declines this month. Indicators for activity, new orders, shipments, and employment were all substantially negative. Firms also reported lower prices for inputs, and about one in four firms reported price decreases for their own products. Indicators for future business conditions fell again this month, suggesting that the region's manufacturing executives expect continued declines over the next six months. Special Questions (November 2008) 1. What change, if any, do you anticipate in your firm's production during the fourth quarter of 2008 compared to the third quarter? All firms Firms attributing expected change to: (% or all reporting firms) ______________________________________ Business conditions Seasonal factors Expect decrease 66.3% 51.5% 14.7% No change 10.5% 1.1% 0.0% Expect increase 14.7% 6.3% 6.3% NR 8.5% 2a. What percentage change in employment do you expect over the next six months? Firms expecting a decrease 69.2% Firms expecting no change 7.7% Firms expecting an increase 23.1% Mean growth rate expected -5.6% Median growth rate expected -3.5% 2b. If you anticipate a decrease in employment, which of the following are planned at your plant? Percent of all reporting firms*: Layoffs 51.3% Reductions by attrition 37.2% Reduced work hours 32.1% Discharges 15.4% Reductions in contract labor 12.8% *Totals add to more than 100 percent because firms could choose more than one category. Summary of Returns November 2008 November vs. October | Six Months from now | vs. November | Prev. | Prev. Diff. Inc. No ch. Dec. Diff. | Diff. Inc. No ch. Dec. Diff. Index Index | Index Index | General Busines -37.5 10.3 33.3 49.7 -39.3 | -4.2 28.1 29.4 38.5 -10.4 Conditions | | New Orders -30.5 17.5 32.5 48.9 -31.4 | -3.6 32.4 28.2 39.4 -7.0 | Shipments -18.8 20.8 34.6 39.6 -18.8 | -12.3 27.2 28.5 42.3 -15.1 | Unfilled Orders -27.5 11.8 45.1 40.9 -29.1 | -18.3 11.2 52.7 33.3 -22.1 | Delivery Times -20.2 6.8 63.8 27.4 -20.6 | -25.6 4.6 66.0 24.2 -19.7 | Inventories -22.3 14.0 51.0 33.6 -19.6 | -20.0 7.5 53.1 34.4 -26.9 | Prices Paid 7.2 8.8 47.4 39.5 -30.7 | 14.5 21.6 45.1 30.8 -9.2 | Prices Received 5.3 11.9 58.1 27.4 -15.5 | 8.9 14.4 52.3 28.3 -13.8 | Number of Emp. -18.0 12.6 48.7 37.8 -25.2 | -16.2 17.1 36.8 42.2 -25.1 | Avg. Emp. Wrkwk -18.4 10.4 54.6 30.1 -19.7 | -12.8 11.6 54.8 30.0 -18.4 | Capital Ex. -- -- -- -- -- | -2.0 22.0 38.0 31.0 -9.0 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 November 18, 2008 October 2008 Conditions in the region's manufacturing sector deteriorated significantly in October, according to firms polled this month. Coincident with the turmoil in financial markets over the past few weeks, indexes for general activity, new orders, shipments, and employment all decreased sharply from their readings in September. Cost pressures, which have been prevalent since the beginning of the year, were considerably less widespread this month. Also, fewer firms reported increases in the prices of their own manufactured goods. Most of the survey's indicators of future activity also fell this month, suggesting that the region's manufacturing executives expect no growth over the next six months. Current Indicators Deteriorate The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 3.8 in September to -37.5, its largest one-month decline ever. The index is now lower than at any time during the nine-month span of negative readings prior to September (see Chart). Other broad indicators were sharply lower this month. Demand for manufactured goods, as represented by the survey's new orders index, decreased 36 points, to a reading of -30.5. The survey's shipments index decreased 21 points. Indexes for unfilled orders and delivery times declined 17 points and 15 points, respectively. A drop in the current employment index paralleled the decline in current indicators, falling 17 points, to -18.0. The percentage of firms reporting a decrease in employment (28 percent) was greater than the percentage reporting an increase (10 percent). The average workweek index fell 11 points and has now been negative for 10 consecutive months. Price Pressures Moderate Significantly Price pressures eased notably this month. Although 30 percent of the firms reported paying higher prices for inputs, this was substantially offset by 22 percent paying lower prices. The prices paid index fell 24 points and has now fallen 68 points over the past three months. Price increases for firms' own manufactured goods also moderated this month: The percentage of firms reporting higher prices for their own manufactured goods (25 percent) was slightly higher than the percentage reporting lower prices (20 percent), and the prices received index fell 10 points, its fifth consecutive monthly decline. Six-Month Indicators Also Decline Area manufacturers' expectations for future conditions deteriorated sharply this month. The future general activity index decreased from 30.8 in September to -4.2 this month (see Chart). Indexes for future new orders and shipments both fell sharply, declining 48 and 55 points, respectively. On balance, firms now expect a decrease in employment over the next six months: The percentage of firms that expect a decrease (32 percent) exceeds the percentage expecting an increase (16 percent). In this month's special questions, manufacturers were asked about problems related to the recent turmoil in credit markets (see Special Questions). Nearly 14 percent of the polled firms indicated that they had experienced problems obtaining credit to finance ongoing activities over the past month; however, a larger percentage of firms (30 percent) indicated that their customers were having such problems. About 18 percent of the firms said the credit problems had affected their own levels of production, and 6 percent reported that adverse conditions had influenced inventory levels. Firms were also asked if changes in financial conditions had prompted them to revise planned spending on plant or equipment over the next six months. Nearly 15 percent of the firms said they have revised their plans substantially downward; 28 percent noted a small downward revision. Summary According to the respondents to October's survey, manufacturing conditions declined sharply this month. Indicators for activity, new orders, shipments, and employment were all negative this month and declined sharply from September. Cost pressures have moderated significantly, and fewer firms are reporting price increases for their own manufactured goods. Indicators for future business conditions also fell markedly this month, and the percentage of firms that now expect a decline in activity over the next six months is higher than that of firms expecting an increase. Special Questions (October 2008) 1. In the past month have either your firm or your customers experienced problems obtaining credit to finance ongoing activities? Your firm Your customers Yes 13.8 29.9 No 77.7 30.9 No response 8.5 39.2 Total 100.0% 100.0% 2. Have the problems affected levels of your own production or inventories?* Production 18.1% Inventories 6.4% Other 3.2% 3. Have recent changes in financial conditions prompted your firm to revise its planned spending on new plant or equipment over the next six to 12 months? Substantial downward revision 14.5 Small downward revision 27.8 No change 46.4 Small upward revision 4.1 Substantial upward revision 3.1 No response 4.1 Total 100.0% *Firms could choose more than one category. Twenty-one percent of total respondents indicated at least one of the problem categories. October 2008 Summary of Returns 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 3.8 11.5 39.5 49.0 -37.5 | 30.8 35.5 18.2 39.7 -4.2 Conditions | | New Orders 5.6 17.0 34.4 47.5 -30.5 | 44.2 33.0 27.0 36.6 -3.6 | Shipments 2.6 19.8 37.6 38.6 -18.8 | 43.1 28.4 23.6 40.6 -12.3 | Unfilled Orders -10.2 6.7 59.0 34.2 -27.5 | 7.6 13.3 48.1 31.6 -18.3 | Delivery Times -5.1 3.3 71.7 23.5 -20.2 | 0.9 3.6 59.9 29.2 -25.6 | Inventories -22.9 11.4 47.2 33.7 -22.3 |-14.7 17.2 38.5 37.2 -20.0 | Prices Paid 31.5 29.6 45.0 22.4 7.2 | 41.7 35.3 33.8 20.8 14.5 | Prices Received 15.5 24.8 51.0 19.5 5.3 | 28.9 29.2 44.5 20.3 8.9 | Number of Emp. -0.9 10.2 59.2 28.2 -18.0 | 15.5 15.9 44.4 32.2 -16.2 | Avg. Emp. Wrkwk -7.4 11.8 54.5 30.3 -18.4 | 12.6 15.2 50.3 28.0 -12.8 | Capital Ex. -- -- -- -- -- | 18.6 25.0 38.0 27.0 -2.0 | | 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 14, 2008. September 2008 The region's manufacturing sector showed some signs of improvement this month, according to firms polled for the September Business Outlook Survey. Indexes for general activity, new orders, and shipments improved from their readings in August. Cost pressures remain but were notably less widespread this month. The percentage of firms indicating higher prices for their own products also declined this month. Most of the survey's indicators of future activity moved higher this month, suggesting that the region's manufacturing executives expect growth in their sector over the next six months. Current Indicators Show Improvement The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -12.7 in August to 3.8 this month (see Chart). This is the first positive reading for the index since last November. Other broad indicators edged higher this month. Demand for manufactured goods, as represented by the survey's new orders index, improved significantly, increasing 18 points, to a positive reading of 5.6. The survey's shipments index increased six points and is now at 2.6. Indexes for unfilled orders and delivery times remained negative, however. Indicators for employment and hours worked remained negative, suggesting little improvement from August. The current employment index was virtually unchanged and remained slightly negative. The percentage of firms reporting a decrease in employment (19 percent) was slightly greater than the percentage reporting an increase (18 percent). The average workweek index moved four points higher but remained negative for the ninth consecutive month. Price Pressures Moderate Price pressures eased notably this month. Although 43 percent of the firms reported paying higher prices for inputs, this was down from 65 percent in August and 77 percent in July. Eleven percent of the firms reported paying lower prices for inputs this month. The prices paid index fell 26 points; this follows an 18-point decline in August. The percentage of firms reporting higher prices for their own manufactured goods also declined this month, falling from 35 percent in August to 26 percent in September. The prices received index dropped 12 points, to its lowest reading since December. Six-Month Forecasts Improve Area manufacturers expect improvement in business conditions over the next six months. The future general activity index increased from 27.6 in August to 30.8 this month, its highest reading since last October (see Chart). Indexes for future new orders and shipments both increased for the third consecutive month. On balance, firms expect an increase in employment over the next six months: The percentage of firms that expect to increase employment (26 percent) exceeds the percentage expecting to decrease it (11 percent). In this month's special questions, manufacturers were asked about their total production for the third quarter (ending in September) and expectations for the fourth quarter (see Special Questions). Firms were nearly evenly divided with respect to the question about third-quarter production: 42 percent expect an overall decline in production for the quarter; 40 percent expect an overall increase. Moreover, the firms were concentrated at two extremes: nearly 27 percent of the firms said production would decline by more than 4 percent in the third quarter, and 19 percent indicated that production would increase more than 4 percent. For the upcoming fourth quarter, more firms expect increases in production (41 percent) than expect declines (25 percent). Summary The manufacturing sector showed some improvement in September. For the first time since last November, more firms reported increases in activity, new orders, and shipments than reported declines. Overall employment showed essentially no improvement, however. Cost pressures remain widespread, but fewer firms reported increases in input prices and prices paid for their own manufactured goods this month. Manufacturers were slightly more optimistic about the outlook for the future in September, and most of the survey's six-month indicators have shown improvement over the past two months. Special Questions (September 2008) 1. How do you expect your firm's total production for the third quarter to compare with that of the second quarter? % Subtotals Decline of more than 4% 26.8 Decline of 3-4% 4.5 Decline of 2-3% 4.5 Decline of 1-2% 1.5 Decline of less than 1% 4.5 41.8 Increase of less than 1% 1.5 Increase of 1-2% 9.0 Increase of 2-3% 9.0 Increase of 3-4% 1.5 Increase of more than 4% 19.3 40.3 No change 17.9 17.9 Totals 100.0% 100.0% 2. For the upcoming fourth quarter, what growth do you expect for production at your plant compared to the third quarter? Significant deceleration 5.9 Some deceleration 19.1 25.0 Some acceleration 33.8 Significant acceleration 7.4 41.2 No change 33.8 33.8 Totals 100.0% 100.0% September 2008 September vs. August Six Months from Now vs. September Prev. |Prev. Diff. Inc. No ch. Dec. Diff. |Diff. Inc. No ch. Dec. Diff. Index Index |Index Index | General Business -12.7 28.0 46.3 24.2 3.8 | 27.6 49.0 32.5 18.2 30.8 Conditions | | New Orders -11.9 32.4 40.7 26.8 5.6 | 39.4 52.0 33.7 7.8 44.2 | Shipments -3.3 31.0 39.5 28.4 2.6 | 36.3 49.1 36.9 5.9 43.1 | Unfilled Orders -8.7 14.2 59.1 24.4 -10.2 | 7.4 20.6 60.5 13.0 7.6 | Delivery Times -9.9 9.7 75.4 14.8 -5.1 | 3.5 11.9 74.7 11.0 0.9 | Inventories -6.6 17.1 42.1 40.0 -22.9 | -5.0 17.3 49.7 32.0 -14.7 | Prices Paid 57.5 42.8 44.9 11.3 31.5 | 51.9 54.9 32.0 13.1 41.7 | Prices Received 27.0 25.8 62.6 10.3 15.5 | 28.1 41.0 47.0 12.0 28.9 | Number of Emp. -1.1 18.2 59.6 19.2 -0.9 | 13.5 26.4 61.2 11.0 15.5 | Avg. Emp. Wrkwk -11.8 17.1 56.5 24.5 -7.4 | 13.5 24.3 64.1 11.7 12.6 | Capital Ex. -- -- -- -- -- | 9.1 31.3 49.8 12.7 18.6 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 September 15, 2008 August 2008 The region's manufacturing sector remains weak, according to firms polled for the August Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment were all negative again this month, although slightly higher than in July. Price pressures remain but were slightly less widespread compared to recent months. However, more than one-third of the firms continue to report higher prices for their own manufactured products. Most of the survey's future indicators moved higher this month, suggesting that the region's manufacturing executives believe growth in their sector will return over the next six months. Current Indicators Remain Negative The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -16.3 in July to -12.7 this month. Despite the improvement, the index has now been negative for nine consecutive months (see Chart). Other broad indicators remained negative but edged somewhat higher. The survey's shipments index, now at -3.3, increased five points, and the new orders index, at -11.9, increased less than one point. Indexes for unfilled orders and delivery times remained negative but increased 10 points and one point, respectively. Indicators for employment and hours worked were consistent with negative readings in other broad indicators. The current employment index improved from -7.3 in July to -1.1. The percentage of firms reporting a decrease in employment (18 percent) was slightly greater than the percentage reporting an increase (16 percent). The average workweek index moved one point higher, but it has now been negative for eight consecutive months. Cost Pressures Show Slight Moderation Almost two-thirds of firms reported higher input prices this month, but this was down from 77 percent in July. Nearly 8 percent of the firms reported lower input prices. The prices paid index decreased 18 points, to 57.5, its first decrease in four months. Regarding prices for their own manufactured goods, the largest percentage of respondents (51 percent) reported no price change from July, but the percentage of firms reporting higher prices this month (35 percent) exceeded the percentage reporting lower prices (8 percent). The prices received index, however, edged slightly lower, from 28.8 in July to 27.0 in August. Future Indicators Show Improvement Despite declines in current activity, area manufacturers expect improvement in conditions over the next six months. Most of the survey's future indicators showed notable improvement this month. The future general activity index increased from 18.0, to 27.6 (see Chart). The indexes for future new orders and shipments showed a similar rise, increasing 15 and 11 points. On balance, firms expect an increase in employment levels over the next six months. The percentage of firms expecting to add workers (29 percent) is greater than that expecting to make cuts (16 percent); however, the future employment index decreased four points. In special questions this month, manufacturing firms were asked about growth in export business over the past year. Exports as a percentage of sales have increased at 51 percent of the manufacturing firms; fewer than 2 percent indicated that exports as a share of sales have decreased. Among firms that indicated that exports were growing, export growth represented about 25 percent of their sales growth. Firms were also asked about outsourcing and operations moved since the beginning of the year. Only 11 percent of the firms indicated that some operations had been moved abroad since the beginning of the year, but 6 percent said that previously outsourced operations had been moved back to the U.S. over that period. Summary The region's manufacturing sector showed continued weakness in August; all broad indicators of activity remained in negative territory but improved marginally from the previous month. Cost pressures remain widespread, but fewer firms reported increases in input price this month than in July. More than one-third of the firms reported price increases for their own manufactured goods. Manufacturers were more optimistic about the outlook this month, with most of the survey's six-month indicators showing notable improvement. Special Questions (August 2008) 1. Over the past year, have exports as a share of your total sales: Aug. 2008 Aug. 2007 Increased substantially 11.9 10.0 Increased modestly 39.0 28.6 Stayed the same 47.4 54.3 Decreased modestly 1.7 5.7 Decreased substantial 0.0 1.4 Total 100.0% 100.0% 2. If your exports are currently growing, how would you complete the following? About ___% of my sales growth is attributable to exports. Average response: 25.3% (average in Aug. 2007 was 18.9%) 3. Since the beginning of the year, have you outsourced or moved any of your activities or production abroad? Yes: 11.1% No: 88.9% 4. Since the beginning of the year, have you returned any of the activities or production you previously outsourced or moved abroad back to the U.S.? Yes: 6.2% No: 93.8% Summary of Returns August 2008 August vs. July Six Months from now vs. August Prev. |Prev. Diff. Inc. No ch. Dec. Diff. |Diff. Inc. No ch. Dec. Diff. Index Inde |Index Index | General Business -16.3 23.4 39.4 36.1 -12.7 | 18.0 40.5 36.1 12.9 27.6 Conditions | | New Orders -12.1 25.1 36.4 37.0 -11.9 | 24.9 49.5 35.0 10.2 39.4 | Shipments -8.0 24.2 47.4 27.6 -3.3 | 25.5 47.0 35.9 10.7 36.3 | Unfilled Orders -18.3 13.9 58.1 22.6 -8.7 | 1.4 20.0 58.7 12.6 7.4 | Delivery Times -10.7 1.4 84.2 11.3 -9.9 | -5.8 9.8 77.1 6.3 3.5 | Inventories -7.5 20.2 51.5 26.8 -6.6 | -2.3 17.7 53.9 22.7 -5.0 | Prices Paid 75.6 65.4 24.0 7.9 57.5 | 67.1 60.1 22.0 8.2 51.9 | Prices Received 28.8 35.3 51.1 8.3 27.0 | 49.6 40.2 40.1 12.2 28.1 | Number of Emp. -7.3 16.4 60.9 17.5 -1.1 | 17.5 29.1 49.7 15.5 13.5 | Avg. Emp. Wrkwk -12.5 13.8 54.3 25.6 -11.8 | 8.5 21.8 60.9 8.3 13.5 | Capital Ex. -- -- -- -- -- | 9.2 23.1 50.6 14.0 9.1 | | 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 August 19, 2008 July 2008 The region's manufacturing sector continued to contract this month, according to firms polled for the July Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment were all negative again this month and little changed from their readings in June. Despite the overall weakness in current activity, slightly more than three-fourths of respondents reported cost increases this month, and more than one-third reported higher prices for their own manufactured products. The region's manufacturing executives remained generally optimistic that manufacturing conditions will improve over the next six months. Indicators Reflect Continued Weakening The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, edged slightly higher, from -17.1 in June to -16.3 this month. The index has now been negative for eight consecutive months (see Chart). Other broad indicators remained negative and little changed. The survey's new orders index was essentially unchanged at -12.1, and the current shipments index decreased one point, from -6.7 in June to -8.0 this month. Indexes for unfilled orders and delivery times, already negative, declined six points and three points, respectively. Indicators for employment and hours worked were consistent with negative readings in other broad indicators. The current employment index declined from -6.9 in June to -7.3, its sixth negative reading in seven months. The percentage of firms reporting a decrease in employment (24 percent) exceeded the percentage reporting an increase (17 percent). The average workweek index fell four points; it has now been negative for seven consecutive months. Manufacturers Continue to Report Price Pressures A larger share of firms — 77 percent, up from 72 percent in June — reported higher input prices this month. The prices paid index increased six points, to 75.6, its highest reading since March 1980. With regard to prices for their own manufactured goods, the largest percentage (51 percent) reported no price change from June, but the percentage of firms reporting higher prices this month (37 percent) was only slightly higher than the previous month's percentage (35 percent). The prices received index, however, edged slightly lower, from 29.7 in June, to 28.8 in July. In special questions this month, firms were asked about recent cost increases and the nature of their pricing. Sixty-one percent of the firms indicated they had increased base prices since the beginning of the year, although 38 percent said they have been unable to pass on cost increases. Moreover, 29 percent have instituted surcharges, and 9 percent have existing price escalation clauses covering cost increases. The respondents also indicated that a large percentage of their suppliers have instituted surcharges covering recent cost increases: 87 percent of the firms reported surcharges for transportation, 52 percent for commodities, and 44 percent for energy. Looking forward regarding their own product pricing, 33 percent of the firms indicated that they are more likely to use escalation clauses in the future, and 31 percent indicated that they are more likely to use surcharges. Future Indicators Reflect Optimism Despite declines in current activity, area manufacturers expect improvement in conditions over the next six months. The future general activity index remained positive but fell modestly, from 21.3 in June to 18.0 this month (see Chart). However, the indexes for future new orders and shipments increased slightly. On balance, firms expect an increase in employment levels over the next six months. The percentage of firms expecting to add workers (33 percent) is greater than the percentage expecting to make cuts (15 percent), and the future employment index increased 10 points. Summary The region's manufacturing sector showed continued weakness in July; all broad indicators of activity were in negative territory and little changed from the previous month. Cost pressures remain widespread, with a larger share of firms reporting input price increases this month. A significant share of the firms reported that suppliers have instituted transportation, commodity, or energy surcharges. The share of firms reporting higher prices for their own manufactured goods, however, was only slightly higher than the previous month's percentage. Despite the weakness in current activity, manufacturers continue to expect conditions to improve over the next six months. Special Questions (July 2008) 1. Since the beginning of the year, how have you passed on cost increases for energy and other materials to your customers? (check all that apply) % We have increased our base prices 60.5 We have been unable to pass on cost increases to our customers 38.4 We have instituted price surcharges 29.1 We have existing contracts that include price escalation clauses 9.3 covering increased costs 2. Have any of your suppliers instituted surcharges and for what costs? (check all that apply) % Transportation 87.2 Commodities 52.3 Energy 44.2 Other 8.1 3. Looking forward, how would you characterize surcharges and/or escalation clauses relative to your traditional pricing structure? (check all that apply) % Escalation clauses incorporating price adjustments are more 32.6 likely to be used in the future Surcharges are more likely to be used in the future 31.4 It is unlikely that we will ever institute surcharges or cost 25.6 escalation clauses These have always been an important element of pricing 22.1 We are considering instituting surcharges for the first time 11.6 Summary of Returns July 2008 July vs. June Six Months from Now vs. July Prev. |Prev. Diff. Inc. No Ch. Dec. Diff. |Diff. Inc. No Ch. Dec. Diff. Index Index |Index Index | General Business -17.1 18.6 44.9 34.9 -16.3 | 21.3 38.4 39.0 20.3 18.0 Conditions | | New Orders -12.4 22.4 40.6 34.4 -12.1 | 24.2 42.2 36.9 17.2 24.9 | Shipments -6.7 25.9 38.1 33.8 -8.0 | 23.5 45.9 29.6 20.4 25.5 | Unfilled Orders -12.5 7.2 61.3 25.5 -18.3 | 14.6 15.1 64.0 13.7 1.4 | Delivery Times -8.0 9.3 69.0 20.0 -10.7 | 6.4 13.5 60.8 19.3 -5.8 | Inventories -12.6 15.6 60.0 23.0 -7.5 | -14.6 20.8 55.0 23.0 -2.3 | Prices Paid 69.3 76.5 20.0 0.9 75.6 | 69.9 73.6 13.2 6.5 67.1 | Prices Received 29.7 37.3 51.2 8.5 28.8 | 35.4 58.5 28.0 8.9 49.6 | Number of Emp. -6.9 16.9 56.4 24.2 -7.3 | 7.3 32.6 48.5 15.1 17.5 | Avg. Emp. Wrkwk. -8.9 13.0 61.6 25.4 -12.5 | 2.2 19.8 59.2 11.3 8.5 | Capital Ex. -- -- -- -- -- | 3.8 27.3 43.7 18.1 9.2 | | 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 July 15, 2008 June 2008 The region's manufacturing sector continued to contract this month, according to firms polled for the June Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment were all negative this month and registered lower readings than in May. There was an appreciable increase in the share of manufacturers reporting price pressures this month, and about one-third of the firms continued to report higher prices for their own products. The region's manufacturing executives remained optimistic about future activity, but most future indicators fell back from their May readings. Indicators Reflect Continued Weakening The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased slightly, from -15.6 in May to -17.1 this month. The index has now been negative for seven consecutive months. Forty-two percent of the firms reported no change in activity from May, but the percentage of firms reporting decreases (34 percent) was twice as large as the percentage reporting increases (17 percent). Other broad indicators also declined this month. The survey's new orders index remained negative and decreased nine points. The current shipments index also decreased nine points, falling from 2.2 in May to -6.7 this month. Indexes for unfilled orders and delivery times remained negative this month, suggesting continued weakness. Indicators for employment and hours worked were consistent with the decline in the other broad indicators. The current employment index declined from -1.0 to -6.9, its fifth negative reading in six months. The percentage of firms reporting a decrease in employment (26 percent) exceeded the percentage reporting an increase (19 percent). Edging three points lower, the average workweek index remained negative for the sixth consecutive month. More Manufacturers Report Higher Input Prices A larger share of firms — 72 percent, up from 61 percent in May— reported higher input prices this month. The prices paid index jumped 16 points, to 69.3 (see Chart), its highest reading since November 1980. With regard to prices for their own manufactured goods, the largest percentage (56 percent) reported no price change from May, but the percentage of firms reporting higher prices this month (35 percent) was slightly lower than the percentage last month (43 percent). The prices received index edged lower, from 31.6 in May to 29.7 in June (see Chart). In special questions this month, firms were asked about the impact of higher costs on prices for finished goods (see Special Questions). Firms were asked to provide an estimate of expected price increases for their own manufactured goods over the next three months. Sixty-five percent of the firms expect price increases over the next three months, 15 percent expect price declines, and 20 percent expect prices to remain constant. The average price increase expected over the next three months was 5.4 percent (70 percent of the firms indicated that prices for their finished goods had already increased since the beginning of the year, with an average increase of 3.8 percent for all firms responding). Firms were also asked about shortages of raw materials or intermediate products or delayed deliveries. Twenty-three percent of firms indicated that they were experiencing such problems. Only 9 percent said the problems had affected rates of production. Outlook Is Less Optimistic Following significant improvement in expectations over the last two months, the future general activity index retreated in June, falling from a May reading of 28.2 to 21.3. Forty percent of the firms expect growth in activity over the next six months; 18 percent expect a decline. The indexes for future new orders and shipments also declined, falling 15 points and 12 points, respectively. On balance, firms expect only a slight increase in employment levels over the next six months. The percentage of firms expecting to add workers (26 percent) is slightly greater than the percentage expecting to make cuts (18 percent), and the future employment index decreased eight points. Summary The region's manufacturing sector showed continued weakness in June: All broad indicators of activity were in negative territory and had declined from their readings in the previous month. Cost pressures remain widespread, with a much larger share of firms reporting increases for input prices this month. The share of firms reporting higher prices for final manufactured goods, however, did not show a corresponding increase this month. Despite the weakness in current activity, manufacturers continue to expect conditions to improve six months out, but they are slightly less optimistic this month. Special Questions (June 2008) 1. What impact are these recent cost increases having, or expected to have, of your finished products over the next three months? % We expect price decreases 14.6 We expect steady prices 20.2 We expect prices increases 65.2 Less than 2.5% 4.5 Between 2.5-5% 28.1 Between 5-7.5% 13.5 Between 7.5-10% 11.2 Between 10-15% 3.3 Greater than 15% 2.3 No response 2.3 Total 100.0 Average expected price change 5.4 Average reported price increase since the beginning of the year* 3.8% *Firms were asked what increases in prices have already occurred since January. 2a. Are you currently experiencing shortages or delayed delivery of any critical raw materials or intermediate products? % Yes 22.5 No 71.9 No response 5.6 Total 100.0 2b. If yes, have these problems affected rates of production? % Yes 9.0 No 31.5 No response 59.5 Total 100.0 Summary of Returns June 2008 June vs. May | Six Months from now | vs. June | Prev. | Prev. Diff. Inc. No ch. Dec. Diff. | Diff. Inc. No ch. Dec. Diff. Index Index | Index Index | General Busines -15.6 17.1 42.0 34.2 -17.1 | 28.2 39.7 40.1 18.4 21.3 Conditions | | New Orders -3.7 21.0 42.1 33.4 -12.4 | 39.6 41.5 39.2 17.3 24.2 | Shipments 2.2 24.6 43.6 31.3 -6.7 | 35.6 40.9 39.5 17.4 23.5 | Unfilled Orders -19.1 6.8 73.3 19.3 -12.5 | 12.3 21.6 68.3 7.0 14.6 | Delivery Times -12.8 4.0 79.2 12.0 -8.0 | -2.5 14.6 74.8 8.2 6.4 | Inventories -13.1 13.2 57.8 25.8 -12.6 | -10.6 13.9 52.7 28.5 -14.6 | Prices Paid 53.8 71.5 25.8 2.2 69.3 | 56.0 73.2 19.7 3.3 69.9 | Prices Received 31.6 35.3 55.9 5.6 29.7 | 26.8 46.6 35.7 11.2 35.4 | Number of Emp. -1.0 19.3 50.8 26.2 -6.9 | 15.5 25.7 49.0 18.4 7.3 | Avg. Emp. Wrkwk -5.6 10.8 65.9 19.7 -8.9 | 9.2 17.8 60.8 15.5 2.2 | Capital Ex. -- -- -- -- -- | 19.9 27.2 40.8 23.4 3.8 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 results reflect data received through June 17, 2008. May 2008 Activity in the region's manufacturing sector showed continued weakness this month, according to firms polled for the May Business Outlook Survey. Indexes for general activity, new orders, and employment remained negative but were higher than in April. Despite the overall weakness in current activity, a significant share of the manufacturers continued to report price pressures, and more firms reported higher prices for their own products. Also this month, the region's manufacturing executives were more optimistic about future activity; the survey's future indicators have improved considerably over the past two months. Most Indexes Less Negative This Month The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -24.9 in April to -15.6 this month, the highest reading in five months (see Chart). Forty-five percent of the firms reported no change in activity from April, but the percentage of firms reporting decreases (34 percent) remained greater than the percentage reporting increases (18 percent). Other broad indicators paralleled the increase in the general activity index this month. Demand for manufactured goods, as represented by the survey's new orders index, remained negative but increased from -18.8 to -3.7. The current shipments index increased from -8.0 to 2.2, its first positive reading in five months. Indicative of continuing weakness, the indexes for unfilled orders and delivery times were both negative this month. Indicators for employment and hours worked paralleled the other broad indicators. The current employment index rose from -11.1 to -1.0, its fourth negative reading in five months but a 10-point improvement over last month. The percentage of firms reporting an increase in employment (13 percent) was nearly equal to the percentage reporting a decrease (14 percent). The average workweek index remained negative for the fifth consecutive month but rose seven points. Manufacturers Report Higher Prices A significant share of the firms reported higher prices, both for inputs and their own products. Sixty-one percent of manufacturers reported higher input prices this month, up from 55 percent in April. The prices paid index edged up slightly, from 51.6 to 53.8. Price increases for the manufacturers' own products remained widespread. Forty-three percent of the firms reported increased prices for their own goods this month, up from 38 percent in April; 11 percent reported lower prices. The prices received index increased one point, to 31.6, its highest reading since January. Six-Month Outlook Improves The future general activity index rose sharply, from a reading of 13.7 in April to 28.2, its highest level in seven months (see Chart). Forty-five percent of firms expect growth in activity over the next six months; 16 percent expect a decline. The indexes for future new orders and shipments also improved this month, up 23 points and 20 points, respectively. On balance, firms expect to increase employment levels over the next six months. The percentage of firms expecting to add workers (24 percent) is greater than the percentage expecting to make cuts (9 percent). The future employment index increased 15 points, to its highest reading in four months. In special questions this month, firms were asked about their recent experience filling job openings (see Special Questions). Fifty percent of the firms said they had recently experienced problems filling job openings because applicants lacked sufficient skills. This was a decrease from the April 2007 number (the percentage of firms experiencing this problem had risen over the previous two years in which the question was asked). However, a somewhat higher percentage of firms indicated that they had no openings this year. Similar to last year, the most frequently cited skills that applicants lacked were skills in the use of production machines or tools and specific plant and system operator skills. Summary The region's manufacturing sector showed continued weakness in May, although most current indicators suggested more moderate declines. The survey's current indicators for activity, new orders, employment, and average hours worked remained negative but increased from lower readings in April. Cost pressures remain widespread, and a larger share of firms reported price increases for their own manufactured goods this month. A significant improvement to the manufacturers' six-month outlook in May lends weight to the idea that the current indicators may have bottomed out. Special Questions (May 2008) 1. Has your firm experienced problems filling job openings in the past three months because applicants did not have sufficient qualifications? May 2008 April 2007 March 2006 April 2004 Yes 50.0% 64.3% 51.4% 42.0% No 34.5% 22.6% 37.2% 36.1% Have had no openings 15.5% 13.1% 11.4% 21.9% Total 100.0% 100.0% 100.0% 100.0% If yes, what are the three most significant skill categories that applicants are lacking? Percent choosing specific skill category* 2008 2007 Skills in the use of production machines or tools 85.7% 76.7% Specific plant and system operator skills 71.8% 69.5% Basic skills (reading, writing, math) 33.0% 48.0% Supervisory, management, or admin. skills 30.8% 57.1% English language skills 21.0% 25.0% Computer skills 13.0% 9.1% * Totals sum to more than 100% because each respondent could select multiple categories. Summary of Returns May 2008 May vs. April | Six Months from now | vs. May | Prev. | Prev. Diff. Inc. No ch. Dec. Diff. | Diff. Inc. No ch. Dec. Diff. Index Index | Index Index | General Busines -24.9 18.4 45.4 34.0 -15.6 | 13.7 44.5 31.6 16.4 28.2 Conditions | | New Orders -18.8 24.8 44.7 28.6 -3.7 | 16.6 52.3 28.9 12.8 39.6 | Shipments -8.0 29.5 41.0 27.3 2.2 | 16.0 44.7 41.1 9.1 35.6 | Unfilled Orders -16.8 8.8 63.2 28.0 -19.1 |-11.9 20.6 65.1 8.3 12.3 | Delivery Times 4.2 9.8 67.5 22.6 -12.8 |-10.4 8.8 77.2 11.3 -2.5 | Inventories -26.2 14.7 57.6 27.7 -13.1 |-13.1 16.7 52.4 27.3 -10.6 | Prices Paid 51.6 60.8 32.2 7.0 53.8 | 55.3 67.3 20.7 11.4 56.0 | Prices Received 30.9 42.9 44.6 11.3 31.6 | 33.4 42.1 38.5 15.3 26.8 | Number of Emp. -11.1 13.0 72.9 14.0 -1.0 | 0.2 24.2 60.9 8.7 15.5 | Avg. Emp. Wrkwk -12.3 10.8 71.8 16.4 -5.6 | -9.2 20.1 64.5 10.8 9.2 | Capital Ex. -- -- -- -- -- | 13.8 35.3 41.1 15.3 19.9 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 results reflect data received through May 13, 2008. April 2008 Activity in the region's manufacturing sector continued to weaken this month, according to firms polled for the April Business Outlook Survey. Indexes for general activity, shipments, new orders, and employment all remained negative this month and decreased from their readings in March. A significant share of the manufacturers continued to report price pressures, and more firms reported higher prices for their own products. Despite the weakness in current activity, the region's manufacturing executives were cautiously optimistic about future activity, with most future indicators showing improvement this month. Indexes Reflect Weaker Activity The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, deteriorated from -17.4 in March to -24.9 this month (see Chart). The index has remained negative for five consecutive months. Forty-eight percent of the firms reported no change in activity from March, but the percentage of firms reporting decreases (38 percent) remained greater than the percentage reporting increases (13 percent). Other broad indicators behaved similarly. Demand for manufactured goods, as represented by the survey's new orders index, decreased from -9.3 to -18.8. The current shipments index decreased slightly, from -6.3 to -8.0. The index for unfilled orders remained negative for the eighth consecutive month, but the delivery times index increased and was positive for the first time in six months. Firms reported a decline in inventories, and the current inventory index fell 13 points, to its lowest level since September 2001. Continued weakness in manufacturing is evident in responses about employment and hours worked this month. The percentage of firms reporting a decrease in employment (19 percent) was greater than the percentage reporting an increase (8 percent), and the current employment index fell from -4.7 to -11.1, its third negative reading in four months. Weakness remained in hours worked: 18 percent indicated declines in average hours worked; 6 percent reported increases. The average workweek index declined from -10.0 in March to -12.3, its fourth consecutive negative reading. Firms Report Higher Prices A sizable share of the firms continued to report higher prices, both for inputs and for their own products. Fifty-five percent of manufacturers reported higher input prices this month, although the prices paid index edged slightly lower, from 54.4 in March to 51.6. Price increases for the manufacturers' own products remained relatively widespread. Thirty-eight percent of the firms reported increased prices for their own goods this month, up from 30 percent in March; 8 percent reported lower prices. The prices received index rose 10 points, to 30.9, its highest reading since January. Six-Month Outlook Sees Improvement The future general activity index rebounded from a reading of -0.5 in March, rising to 13.7, its highest level in five months (see Chart). Thirty-seven percent of firms expect growth in activity over the next six months; 24 percent expect declines. The indexes for future new orders and shipments also improved this month, rising eight points and five points, respectively. On balance, firms expect to maintain current employment levels over the next six months. The percentage of firms expecting to add workers is essentially the same as the percentage expecting to make cuts (23 percent). In this month's special questions, firms were asked about changes in demand for their products and changes in capital spending plans since January (see Special Questions). The percentage of firms indicating that demand was currently lower than they had expected at the beginning of the year (38 percent) exceeded the percentage indicating that demand was greater than expected (29 percent). With regard to capital spending, the percentage of firms indicating that they had decreased their capital spending plans (27 percent) was greater than the percentage indicating they had increased them (19 percent) since January. Moreover, since January, 10 percent of the firms indicated that they had either delayed planned capital spending until later in the year or postponed it indefinitely. Summary The region's manufacturing sector showed continued weakness in April. The survey's current indicators for activity, new orders, shipments, employment, and average hours worked remained negative and declined from their readings in March. Cost pressures remained widespread, and a larger share of firms reported price increases for their own manufactured goods this month. Although somewhat more optimistic about the future this month, manufacturers remain generally cautious. Firms expect no increase in employment over the next six months, and some firms have cut back, delayed, or postponed planned capital spending. Special Questions (April 2008) 1. How would you characterize the current demand for your product(s) compared to what was expected at the beginning of the year? % Greater than expected 29.0 Significantly greater 8.1 Somewhat greater 20.9 About what was expected 26.8 Less than expected 38.4 Somewhat less 23.3 Significantly less 15.1 No response 5.8 Total 100.0 2. To what extent have you changed your plans for capital spending since January? % Increased 18.6 Increased significantly 5.8 Increased somewhat 12.8 No change 38.4 Decreased 26.8 Decreased somewhat 23.3 Decreased significantly 3.5 Delayed until later in the year 4.6 Postponed indefinitely 5.8 No response 5.8 Total 100.0 April 2008 April vs. March | Six Months from Now | vs. April | Prev. |Prev. Diff. Inc. No ch. Dec. Diff. |Diff. Inc. No ch. Dec. Diff. Index Index |Index Index | General Busines -17.4 13.1 47.9 38.1 -24.9 | -0.5 37.3 34.5 23.6 13.7 Conditions | | New Orders -9.3 20.0 41.2 38.8 -18.8 | 8.5 38.5 35.9 21.9 16.6 | Shipments -6.3 22.6 46.7 30.7 -8.0 | 10.8 37.2 35.2 21.2 16.0 | Unfilled Orders -18.7 10.3 61.6 27.1 -16.8 | -15.5 11.0 60.8 22.9 -11.9 | Delivery Times -10.3 14.6 72.9 10.4 4.2 | -19.2 8.4 68.2 18.7 -10.4 | Inventories -13.5 13.6 45.9 39.8 -26.2 | -27.3 18.4 46.2 31.4 -13.1 | Prices Paid 54.4 54.5 41.3 2.9 51.6 | 64.1 60.4 30.2 5.1 55.3 | Prices Received 21.2 38.4 54.2 7.5 30.9 | 36.2 45.3 42.0 11.9 33.4 | Number of Emp. -4.7 8.2 71.3 19.3 -11.1 | 0.6 22.9 48.9 22.7 0.2 | Avg. Emp. Wrkwk -10.0 5.9 73.2 18.2 -12.3 | -1.5 9.6 65.8 18.8 -9.2 | Capital Ex. -- -- -- -- -- | -2.7 27.9 45.9 14.1 13.8 | 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 results reflect data received through April 15, 2008. March 2008 Activity in the region's manufacturing sector showed continued weakness this month, according to firms polled for the March Business Outlook Survey. Indexes for general activity, new orders, and shipments remained negative, although they increased slightly. Despite the reported weakness, a significant share of the manufacturers continued to report price pressures. Most future indicators rebounded this month, after having reached their lowest readings since 2001 last month. Indexes Suggest Weakness Continues The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, improved from -24.0 in February to -17.4 in March (see Chart). The index has remained negative for four consecutive months. Fifty-one percent of the firms reported no change in activity from February, but the percentage of firms reporting decreases (33 percent) remained greater than the percentage reporting increases (15 percent). Other broad indicators also suggested continued declines this month, although their readings were also less negative. Demand for manufactured goods, as represented by the survey's new orders index, increased slightly, from -10.9 to -9.3. The current shipments index increased from -12.2 to -6.3. Indexes for both unfilled orders and delivery times remained negative, and both declined from their readings in February. Continued weakness was also evident this month in responses about employment and hours worked. The percentage of firms reporting a decrease in employment (20 percent) was slightly higher than the percentage reporting an increase (15 percent), and the current employment index fell from 2.5 to -4.7, its second negative reading in three months. Weakness was most evident this month in hours worked: 21 percent indicated declines in average hours worked; 11 percent reported increases. The average workweek index dropped from -3.9 in February to -10.0 this month. Firms Report Price Pressures A notable share of the firms reported higher prices for inputs this month. Sixty-one percent of the manufacturers surveyed reported higher input prices. The prices paid index jumped from 46.6 in February to 54.4 and has increased 18 points since December. Price increases for the manufacturers' own products were still relatively widespread. Thirty percent of the firms reported increased prices for their own goods, although the prices received index decreased slightly, from 24.3 to 21.2. Six-Month Outlook Improves But Remains Cautious The future general activity index rebounded from a reading of -16.9 in February (its lowest since 1990) to -0.5 this month (see Chart). The percentage of firms expecting growth in activity over the next six months (28 percent) was offset by the percentage expecting decreases (29 percent). The indexes for future new orders and shipments also rebounded. The future new orders index increased from -7.8 to 8.5, and the future shipments index increased from 5.2 to 10.8. On balance, firms expect to maintain current employment levels over the next six months. The percentage of firms expecting to add workers is essentially the same as that of firms expecting to make cuts (22 percent). The future employment index improved from -8.8 to 0.6. In this month's special questions, firms were asked about expected growth in production during the second quarter compared with the first quarter (see Special Questions). As a group, the firms expect little or no growth in the second quarter. About 26 percent expect meager growth due to seasonal conditions, but this is offset by the 56 percent of firms expecting declines due to weaker business conditions or other factors. Summary The region's manufacturing sector showed continued weakness in March, as evidenced by negative readings of the indexes for all of the broad current indicators: activity, new orders, shipments, employment, and average hours worked. Cost pressures remain widespread, and a notable share of firms reported price increases for their own manufactured goods. Firms' expectations for future activity improved somewhat this month, after deteriorating sharply over the previous four months. Firms indicated, on balance, that they anticipate virtually flat production levels for the second quarter. Despite some improvement in their outlook this month, the region's manufacturers are cautious about growth over the next six months. Special Questions (March 2008) 1a. What change, if any, do you anticipate in your firm's production during the second quarter of 2008 compared to the first quarter? Avg. % Total All Firms 0.0 Firms attributing change to: Seasonal conditions* 0.3 Business conditions* -0.2 Other factors* -0.1 * Based on answers to question 1b below. 1b. Does the expected increase or decrease reflect seasonal factors or a change in business conditions? % Seasonal conditions 25.6 Business conditions 31.7 Other factors 24.4 No response 18.3 Total 100.0 March 2008 March vs. February Six Months from now vs. March Prev. |Prev. Diff. Inc. No ch. Dec. Diff. |Diff. Inc. No ch. Dec. Diff. Index Index |Index Index | General Busines -24.0 15.4 51.2 32.8 -17.4 | -16.9 28.3 41.0 28.7 -0.5 Conditions | | New Orders -10.9 20.1 47.6 29.4 -9.3 | -7.8 35.8 34.6 27.4 8.5 | Shipments -12.2 19.7 53.9 25.9 -6.3 | 5.2 38.5 33.2 27.8 10.8 | Unfilled Orders -10.9 12.7 55.6 31.5 -18.7 | -10.6 10.6 62.9 26.1 -15.5 | Delivery Times -7.6 9.8 70.1 20.1 -10.3 | -5.8 7.8 65.3 26.9 -19.2 | Inventories -13.0 20.2 45.4 33.8 -13.5 | -12.9 12.0 45.5 39.4 -27.3 | Prices Paid 46.6 60.6 29.2 6.2 54.4 | 36.8 70.7 20.2 6.6 64.1 | Prices Received 24.3 29.6 60.8 8.3 21.2 | 32.1 50.3 33.6 14.0 36.2 | Number of Emp. 2.5 14.9 65.0 19.6 -4.7 | -8.8 22.4 55.0 21.8 0.6 | Avg. Emp. Wrkwk -3.9 11.4 65.4 21.4 -10.0 | -1.9 19.6 59.2 21.2 -1.5 | Capital Ex. -- -- -- -- -- | 1.7 22.6 46.7 25.3 -2.7 | 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 results reflect data received through March 18, 2008. February 2008 Activity in the region's manufacturing sector continued to weaken this month, according to firms surveyed for the February Business Outlook Survey. After falling significantly last month, indexes for general activity, shipments, and new orders remained negative. Despite reporting a weakness in activity, firms continued to report a rise in prices for inputs and their own manufactured goods. Manufacturers' outlook for the next six months turned noticeably more pessimistic this month. Indexes Suggest Continued Weakness The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, fell from -20.9 in January to -24.0 this month (see Chart). Forty percent of the firms reported no change in activity from January, but the percentage of firms reporting decreases (42 percent) was substantially greater than the percentage reporting increases (18 percent). Other broad indicators also suggested continued declines this month. Demand for manufactured goods, as represented by the survey's new orders index, remained negative, although the index increased from -15.2 to -10.9. The current shipments index, however, fell 10 points, from -2.3 to -12.2. Indexes for both unfilled orders and delivery times remained negative. Overall weakness was still evident in replies about employment and hours worked, although the indexes were higher than last month's low readings. The current employment index increased from -1.5 to 2.5, and the percentage of firms reporting an increase in employment (22 percent) was slightly greater than the percentage reporting a decrease (20 percent). Weakness was still evident in average hours worked: 18 percent reported declines; 14 percent reported increases. The average workweek index was less negative this month, at -3.9, compared with -16.1 in January. Firms Report Higher Prices A sizable share of the firms continued to report higher prices, both for inputs and their own products. Fifty-three percent of manufacturers reported higher input prices this month, although the prices paid index edged slightly lower, from 49.8 in January to 46.6. Price increases for the manufacturers' own products remained relatively widespread. Thirty-one percent of the firms reported increased prices for their own goods this month. The prices received index, however, declined from its 39-month high of 32.0 in January to 24.3. Six-Month Outlook Deteriorates The outlook for manufacturing growth over the next six months deteriorated further this month. The future general activity index declined from 5.2 in January to -16.9, its first negative reading since January 2001 and the lowest reading since 1990. The index has declined 57 points over the past four months (see Chart). The percentage of firms expecting declines in activity over the next six months (39 percent) now exceeds the percentage expecting increases (22 percent). The index for future new orders dropped 17 points and moved into negative territory, while the future shipments index fell eight points but remained positive. This month, the future employment index declined notably. For the first time since 2001, the index fell below zero, declining from 18.8 to -8.8. The percentage of firms expecting declines in employment (31 percent) exceeded the percentage expecting increases (22 percent). In this month's special questions, firms were asked to characterize their current inventory situation, as well as their customers' inventory plans (see Special Questions). Although 58 percent of the firms said their current inventories are about right for current economic conditions, more than 31 percent indicated that current inventories were too high, and most of these firms said they expect a decrease in the first quarter. Only 8 percent indicated that current inventories were too low. Nearly 40 percent of the firms also said that their customers' inventory plans had decreased, and 56 percent of those firms indicated that rebuilding of customers' inventories would not occur until after the second quarter. Summary The region's manufacturing sector showed continued weakness in February, as evidenced by negative readings of the indexes for most of the broad current indicators: activity, new orders, shipments, and average hours worked. Price pressures were also evident, although the survey's price diffusion indexes were slightly less elevated this month. Firms' expectations for future activity have deteriorated sharply over the past four months, and for the first time since 2001, more firms expect declines in activity and employment over the next six months than expect increases. Special Questions (February 2008) 1. Choose the statement that best characterizes your current inventory situation: Inventories are: % About right for current economic conditions 57.9 Too high and are expected to increase in the first quarter 2.4 Too high and are expected to decrease in the first quarter 28.9 Too low and are expected to increase in the first quarter 4.8 Too low and are expected to decrease in the first quarter 3.6 No response 2.4 2. Over the past several months did your customers inventory plans: % Increase 3.6 Not chang 37.3 Decrease* 39.8 No response 19.3 * Firms indicating that customers' inventory plans had decreased were asked when they expect a rebuilding of inventories. About 14 percent said this would occur in the first quarter, 17 percent said it would occur in the second quarter, 56 percent said it would happen after the second quarter, and 14 percent thought the declines would be permanent. February 2008 February vs. January | Six Months from now | vs. February | Prev. | Prev. Diff. Inc. No ch. Dec. Diff. | Diff. Inc. No ch. Dec. Diff. Index Index | Index Index | General Busines -20.9 17.9 39.6 42.0 -24.0 | 5.2 21.9 35.9 38.8 -16.9 Conditions | | New Orders -15.2 25.8 36.9 36.8 -10.9 | 9.5 28.7 33.1 36.4 -7.8 | Shipments -2.3 24.9 34.6 37.2 -12.2 | 13.6 35.9 33.1 30.7 5.2 | Unfilled Orders -6.2 18.8 49.3 29.7 -10.9 | -12.1 15.4 57.8 25.9 -10.6 | Delivery Times -3.1 10.6 70.3 18.2 -7.6 | -8.2 9.4 73.1 15.2 -5.8 | Inventories -11.7 15.5 55.4 28.6 -13.0 | -7.7 20.2 43.8 33.1 -12.9 | Prices Paid 49.8 53.0 40.5 6.4 46.6 | 60.6 43.8 45.3 7.0 36.8 | Prices Received 32 30.7 62.5 6.4 24.3 | 37.2 43.0 44.2 10.9 32.1 | Number of Emp. -1.5 22.1 58.3 19.6 2.5 | 18.8 22.3 46.7 31.0 -8.8 | Avg. Emp. Wrkwk -16.1 13.7 65.6 17.6 -3.9 | -1.2 18.5 60.5 20.4 -1.9 | Capital Ex. -- -- -- -- -- | 19.0 23.8 47.9 22.1 1.7 Notes: (1) Items may not add to 100 percent bec ause 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 results reflect data received through February 18, 2008. January 2008 Activity in the region's manufacturing sector weakened this month, according to firms surveyed for the January Business Outlook Survey. The general activity and new orders indexes fell sharply this month, and indexes for shipments and employment also turned negative. A significant share of firms reported a rise in prices for inputs and for their own manufactured goods. Also this month, the region's manufacturing executives were less optimistic about future activity, and most future indicators have fallen considerably over the past three months. Indicators Suggest Weakening The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, fell sharply from a revised reading of -1.6 in December to -20.9, its lowest reading since October 2001 (see Chart).* Forty percent of the firms reported no change in activity from December, but the percentage of firms reporting decreases (41 percent) was substantially greater than the percentage reporting increases (20 percent). Other broad indicators also suggested declines this month. Demand for manufactured goods, as represented by the survey's new orders index, fell dramatically, from a revised reading of 12.0 in December to -15.2, its first negative reading in 15 months. The current shipments index fell 17 points, from 15.0 to -2.3. Indexes for both unfilled orders and delivery times remained negative. Weakness was also evident in replies about employment and hours worked. The percentage of firms reporting a decrease in employment (22 percent) was slightly greater than the percentage reporting an increase (21 percent), and the current employment index declined four points, to its first negative reading since September 2003. Weakness was most evident in average hours worked this month: 31 percent reported declines in average hours worked, 15 percent reported increases, and the average workweek index fell from 7.4 in December to -16.1. Firms Report Higher Prices A sizable share of firms reported higher prices for inputs this month. One-half of manufacturers reported higher input prices this month, and the prices paid index jumped from 36.5 in December to 49.8 in January, its highest reading since May 2006. Price increases for the manufacturers' own products were more widespread. Thirty-six percent of the firms reported increased prices for their own goods, and the prices received index increased from a revised 15.2 in December to 32.0 this month, its highest reading since October 2004. Six-Month Outlook Weakens Further The outlook for manufacturing growth over the next six months was less optimistic than in December. The future general activity index declined from a revised reading of 11.1 in December to 5.2 this month. The index has declined 34 points over the past three months (see Chart). The percentage of firms expecting growth in activity over the next six months (32 percent) is only slightly higher than the percentage expecting decreases (27 percent). The indexes for future new orders edged down two points, while the future shipments index increased three points. Firms' expectations for future employment, however, were virtually unchanged: The future employment index increased one point, and nearly 39 percent of the firms still expect to increase employment over the next six months. In this month's special questions, firms were asked to appraise the current demand for their manufactured products relative to expectations (see Special Questions on page 3). When asked to characterize the underlying demand for their products over the past three months, the percentage of firms indicating that demand had increased (42 percent) was higher than the percentage that said it had decreased (37 percent). The composition of the responses, however, suggests a slightly different perspective, because 11 percent indicated that demand had declined significantly, while only 1 percent indicated that demand had increased significantly. However, when asked to appraise the state of current demand compared with what was expected three months ago, the percentage of firms that said underlying demand was less than expected (27 percent) was slightly higher than the percentage that said it was greater than expected (20 percent). Firms were also asked to state their expectations about the timing of a turnaround in demand, if they had experienced recent declines. Only half of the firms responded to this question, and slightly more than one-half of those responding indicated that they expect recovery in their business to take longer than six months. The remaining firms that responded to this question expect a recovery time of four to five months (20 percent); two to three months (13 percent); and one month (15 percent). Summary The region's manufacturing sector weakened in January, as evidenced by negative readings of the indexes for activity, new orders, shipments, employment, and average hours worked. Price pressures were also elevated this month; more firms reported increases in input prices and price increases for their own manufactured goods. Firms' expectations for future activity have deteriorated sharply over the past three months. On the positive side, more firms expect growth over the next six months than expect declines, and nearly 39 percent of firms expect to increase hiring over the first half of the year. *The survey's annual historical revisions, which incorporate new seasonal adjustment factors, were released on Thursday, January 10, 2008. Revisions for selected series from 2000 to 2007 are listed on pages 3-4 of this release. The full set of revised historical data is available at: philadelphiafed.org/econ/bos/historicalrevisions2008.cfm. Special Questions (January 2008) 1. Over the past three months, how would you characterize the underlying demand for your manufactured products? Percent Increasing 41.8 Increasing significantly 1.3 Increasing moderately 40.5 No change 20.2 Decreasing 36.7 Decreasing moderately 25.3 Decreasing significantly 11.4 No response 1.3 2. How does the current underlying demand for your products compare to what you expected three months ago? Percent Greater than expected 20.2 About what was expected 51.9 Less than expected 26.6 No response 1.3 3. If you have experienced recent declines in demand, when do you expect to see a turnaround? Percent More than 6 months 52.5 4-5 Months 20.0 2-3 Months 12.5 One Month 15.0 Total 100.0 Summary of Returns January 2008 January vs. December | Six Months from now | vs. January | Prev. |Prev. Diff. Inc. No ch. Dec. Diff. |Diff. Inc. No ch. Dec. Diff. Index Index |Index Index | General Busines -1.6 19.7 39.7 40.6 -20.9 | 11.1 31.7 41.1 26.5 5.2 Conditions | | New Orders 12.0 23.6 37.7 38.8 -15.2 | 11.6 36.0 35.7 26.5 9.5 | Shipments 15.0 26.1 41.3 28.4 -2.3 | 10.2 39.2 33.3 25.5 13.6 | Unfilled Orders -4.4 16.5 60.1 22.7 -6.2 |-10.6 13.8 57.6 25.9 -12.1 | Delivery Times -2.3 16.0 64.1 19.1 -3.1 |-12.8 14.0 63.7 22.2 -8.2 | Inventories -6.5 15.0 57.2 26.8 -11.7 | -4.1 18.8 49.5 26.4 -7.7 | Prices Paid 36.5 50.0 49.8 0.2 49.8 | 43.1 65.4 27.1 4.8 60.6 | Prices Received 15.2 36.1 58.6 4.1 32.0 | 25.9 45.9 43.3 8.7 37.2 | Number of Emp. 3.8 20.6 55.6 22.1 -1.5 | 17.4 38.7 41.4 19.9 18.8 | Avg. Emp. Wrkwk 7.4 15.2 50.7 31.4 -16.1 | 2.8 21.9 50.5 23.1 -1.2 | Capital Ex. -- -- -- -- -- | 22.3 37.3 35.3 18.3 19.0 | 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 results reflect data received through January 15, 2008.