December 2010 Results from the Business Outlook Survey suggest that regional manufacturing conditions continued to improve in December. All of the broad indicators remained positive and suggest an expansion of activity. Increases in input prices were more widespread this month, and more firms reported increases in prices for their manufactured goods. The survey’s broad indicators of future activity suggest that optimism among the region’s manufacturing executives also continues to improve. Indicators Suggest Continued Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of 22.5 in November to 24.3 in December. The index has been positive for three consecutive months (see Chart). The demand for manufactured goods is showing continued improvement: The new orders index increased 4 points this month and has increased for three consecutive months. The shipments index declined 10 points, but it has remained positive for three consecutive months. Firms’ responses continue to suggest that labor market conditions are improving. For the fourth consecutive month, the percentage of firms reporting an increase in employment (17 percent) is higher than the percentage reporting a decline (12 percent). Although the overall employment index fell 8 points, the workweek index increased 8 points, and it has increased sharply over the past three months. Higher Prices Are Reported Price increases for inputs as well as firms’ own manufactured goods are more widespread this month. Fifty-two percent of the firms reported higher prices for inputs, compared with 38 percent in the previous month. The prices paid index, which increased 17 points this month, has increased 41 points over the past three months. On balance, firms also reported a rise in prices for manufactured goods: More firms reported increases in prices (21 percent) than reported decreases (10 percent), and the prices received index increased 13 points, its first positive reading in eight months. Optimism Has Been Increasing The future general activity index remained positive for the 24th consecutive month and increased 2 points, to a reading of 50.5, its highest reading in nine months (see Chart). The indexes for future new orders and shipments also showed improvement, increasing 7 and 5 points, respectively. More firms expect to increase employment over the next six months (38 percent) than expect to decrease employment (10 percent). The future employment index increased 7 points, to its highest reading in seven months. In this month’s special questions, firms were asked about their expectations for changes in various categories of input and labor costs for the coming year (see Special Questions). Similar to responses in previous years, current responses indicate that the largest annual increase is expected to be for health benefits (8.6 percent). In contrast, other labor costs (wages and non-health-care costs) are expected to rise only 2.1 and 2.3 percent, respectively. All other nonlabor expense categories are expected to increase in 2011: energy (3.1 percent), raw materials (3.9 percent), and intermediate goods (2.7 percent). Firms were also asked how the expected cost increases will compare to 2010 costs. In every category the percentage of firms indicating that their costs would be higher in 2011 was greater than the percentage reporting that their costs would be lower. Summary According to respondents to the December Business Outlook Survey, regional manufacturing is continuing to grow at year-end. All of the broad indicators remained positive, with some firms expanding their workforce and more firms reporting longer average work hours. Increases in input prices continue to be reported, and price increases for manufactured goods are more evident this month. The degree of confidence about future economic conditions continues to show improvement. Released: December 16, 2010, 10:00 a.m. ET The January Business Outlook Survey will be released on January 20, 2011, at 10 a.m. ET. The survey’s annual historical revisions, which incorporate new seasonal adjustment factors, will be released on Thursday, January 13, 2011, at 10 a.m. ET. Special Questions (December 2010) 1. What percent change in costs do you expect for the following categories in 2011? Energy Other Raw Intermediate Health Nonhealth Materials Goods Wages Benefits Benefits Increase 15% or more 2.4 0 0 1.2 15.5 1.2 Increase of 12.5%-15% 0 1.2 1.2 0 4.8 1.2 Increase of 10%-12.5% 4.8 4.8 0 0 13.1 0 Increase of 7.5%-10% 10.7 15.5 6.0 0 20.2 1.2 Increase of 5%-7.5% 13.1 8.3 8.3 2.4 17.9 7.1 Increase of 2.5%-5% 16.7 22.6 20.2 38.1 9.5 25.0 Increase less than 2.5% 20.2 27.4 26.2 33.3 7.1 19.0 Stay at current levels 13.1 10.7 22.6 16.7 4.8 35.7 Decline less than 2.5% 6.0 0 0 0 0 0 Decline of more than 2.5% 7.1 1.2 0 2.4 0 0 Avg. Expected Change 3.1 3.9 2.7 2.1 8.6 2.3 Estimates for 2010 from same time last year 7.9 2.9 1.6 1.3 8.6 1.6 ------------------------------------------------------------------------------- 2. How do these expected costs compare with those in 2010? Higher 63.1% 65.5% 44.0% 44.0% 64.3% 27.4% Same 17.9% 22.6% 39.3% 39.3% 23.8% 59.5% Lower 11.9% 3.6% 2.4% 9.5% 4.8% 3.6% * Percentages do not add to 100 percent because some reporters did not respond to the questions. December 2010 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 22.5 36.1 52.1 11.8 24.3 49.0 56.6 31.4 6.1 50.5 Conditions New Orders 10.4 33.0 46.5 18.3 14.6 39.4 54.0 33.9 7.5 46.5 Shipments 16.8 30.1 46.0 22.8 7.3 39.5 51.5 36.9 6.8 44.7 Unfilled Orders 3.7 18.8 68.8 12.4 6.5 9.8 21.9 66.3 10.2 11.7 Delivery Times 2.1 9.9 87.4 1.5 8.5 3.8 12.2 81.2 3.8 8.4 Inventories -5.9 15.3 62.0 17.3 -2.0 -12.8 26.1 47.6 23.5 2.6 Prices Paid 34.0 51.9 47.3 0.7 51.2 53.9 63.2 34.6 0.0 63.2 Prices Received -2.1 21.1 68.5 10.4 10.7 33.4 32.7 59.3 5.9 26.8 Number of Emp. 13.3 16.8 70.2 11.7 5.1 21.7 38.1 51.4 9.8 28.4 Avg. Emp. Wrkwk 10.9 19.3 78.2 0.0 19.3 19.0 30.0 60.0 6.3 23.7 Capital Ex. -- -- -- -- -- 20.2 36.6 47.3 6.4 30.1 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 December 13, 2010. November 2010 Results from the Business Outlook Survey suggest that regional manufacturing activity showed improvement in November. All of the survey’s broad indicators of economic performance showed improvement from their reading in October, and firms reported an increase in employment and work hours. More firms reported increases in input prices this month, although downward pressure on the prices of firms’ manufactured goods was still evident. The survey’s broad indicators of future activity suggest that firms remain optimistic about growth over the next six months. Indicators Suggest Improvement The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of 1.0 in October to 22.5 in November (see Chart). This is the highest reading in the index since last December. Indexes for new orders and shipments also improved this month, and each index increased 15 points. Indexes for both delivery times and un-filled orders changed from negative to positive this month, suggesting improvement. Labor market conditions also showed some improvement this month, paralleling the improvement in other broad indicators. This month, firms also reported some growth in employment and a longer workweek. The percentage of firms reporting increases in employment (27 percent) was greater than the percentage of firms reporting decreases (14 percent). The index for employment was positive for the third consecutive month and increased 11 points. The average workweek index increased significantly, from -6.0 to 10.9. Higher Input Prices Are Widespread Price increases for inputs remain relatively widespread this month. Thirty-eight percent of the firms reported higher prices for inputs this month. The prices paid index, which had increased in the previous month, increased 3 points. On balance, firms continued to report declines in prices for their own manufactured goods: Slightly more firms reported decreases in prices (16 percent) than reported increases (14 percent). The prices received index remained negative for the sixth consecutive month, although it increased 7 points this month. Firms Remain Optimistic About Growth The future general activity index increased 8 points, to a reading of 49.0, its highest reading in eight months (see Chart). The future new orders and shipments indexes also remained at relatively high readings, with about half of the reporting firms expecting growth over the next six months. More firms expect to increase employment over the next six months (29 percent) than expect to decrease employment (7 percent). The future employment index edged 1 point higher to its highest reading in six months. The survey’s index for future prices showed continued increases this month. The future prices paid and prices received indexes increased 7 points and 18 points, respectively. For this month's special questions, manufacturers were asked about current capacity utilization rates compared with the same time last year, as well as their plans for capital spending (see Special Questions). The average capacity utilization rate among the firms polled increased from 69 percent in November 2009 to the current rate of 72 percent. The share of firms expecting to increase their capital spending on plant and equipment (38 percent) was greater than the share planning reductions (20 percent), which represents a marked improvement over last year when the same question was asked. And as a group, the firms expecting higher spending had a larger average increase in their capacity utilization rate compared with last year. Summary According to respondents to the November Business Outlook Survey, regional manufacturing showed a pickup in activity. All of the broad economic indicators, including new orders, showed improvement this month. However, input price pressures were still evident this month. Firms reported higher employment this month, and the average workweek also increased compared with October. Firms continued to expect growth in their manufacturing business over the next six months, and the degree of confidence has improved notably over the past several months. Special Questions (November 2010) 1. Which of the following best characterizes your plant’s current capacity utilization rate and last year's? Capacity Utilization Rate Current Same Time Last Year (% of reporters) (% of reporters) Less than 60% 15.4 29.1 60%-65% 14.1 13.9 65%-70% 11.5 17.7 70%-75% 21.8 12.7 75%-80% 9.0 7.6 80%-85% 12.8 3.8 85%-90% 9.0 5.1 90%-95% 1.3 8.9 95%-100% 5.1 1.3 Average Utilization Rate 72.4 68.7 2. Is your firm increasing or | The average capital utilization rate for decreasing spending on plant and | the group from responses to question one equipment over the next year? | _____________________________________|__________________________________________ | 2010 2009 | 2010 2009 Difference | Increasing 37.8 16.3 | 73.2 65.6 7.6 Decreasing 19.5 40.7 | 74.5 75.6 -1.1 No change 35.4 25.6 | 68.8 63.7 5.1 | Average for all surveyed firms | 72.4 68.7 3.7 Published U.S. estimate* | 72.9** 68.9 4.0 *Source: Federal Reserve Board. ** Shown is most recent published data for October 2010. Summary of Returns November 2010 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 1.0 39.9 41.4 17.4 22.5 41.0 58.3 27.1 9.2 49.0 Conditions New Orders -5.0 35.8 35.5 25.4 10.4 43.0 49.7 34.4 10.3 39.4 Shipments 1.4 37.7 38.2 20.9 16.8 32.3 51.8 31.5 12.3 39.5 Unfilled Orders -8.9 21.7 57.8 18.0 3.7 11.4 23.3 57.4 13.5 9.8 Delivery Times -0.3 12.9 73.7 10.9 2.1 2.2 14.8 66.8 11.0 3.8 Inventories -18.6 18.5 57.0 24.5 -5.9 3.7 16.8 49.6 29.6 -12.8 Prices Paid 31.5 37.9 56.6 3.9 34.0 46.7 54.8 39.1 1.0 53.9 Prices Received -9.0 13.7 66.6 15.8 -2.1 15.0 40.3 44.4 6.9 33.4 Number of Emp. 2.4 27.1 56.0 13.8 13.3 21.0 28.7 56.3 7.0 21.7 Avg. Emp. Wrkwk -6.0 22.3 60.6 11.4 10.9 25.7 26.0 56.6 7.0 19.0 Capital Ex. -- -- -- -- -- 21.4 29.6 51.4 9.4 20.2 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 November 16, 2010. October 2010 Results from the Business Outlook Survey suggest that regional manufacturing activity was steady in October. Although the broad survey measures showed marginal improvement this month, the new orders index continued to suggest weak demand for manufactured goods. More firms reported increases in input prices this month, although the prices of firms’ manufactured goods continued to decline. The survey’s broad indicators of future activity suggest that optimism among the region’s manufacturing executives improved notably this month. Indicators Suggest Steady Activity The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of –0.7 in September to 1.0 in October. The index had been negative for two consecutive months (see Chart). Indexes for new orders and shipments continued to indicate weakness this month: The new orders index increased 3 points but remained negative for the fourth consecutive month. The shipments index increased 9 points, moving the index above zero for the first time in three months. Firms continue to report overall declines in inventories and unfilled orders and shorter delivery times. Firms reported near steady employment again this month, but lower average work hours for existing employees. The percentage of firms reporting increases in employment (20 percent) narrowly edged out the percentage of firms reporting decreases (17 percent). The index for employment was slightly positive for the second consecutive month but increased just 1 point. Indicative of still weak activity, more firms reported declines in average work hours for existing employees (22 percent) than reported increases (16 percent). Higher Input Prices Are Reported Price increases for inputs were more widespread this month. The prices paid index, which had declined 33 points over the previous five months, increased 22 points. Thirty-four percent of the firms reported higher prices for inputs, compared with 23 percent in the previous month. On balance, firms continued to report declines in prices for their own manufactured goods: More firms reported decreases in prices (16 percent) than reported increases (7 percent). And the prices received index remained negative for the fifth consecutive month. Optimism Rebounds This Month The future general activity index remained positive for the 22nd consecutive month and increased 15 points, to a reading of 41.0, its highest reading in six months (see Chart). The future new orders and shipments indexes also showed improvement, increasing 22 and 13 points, respectively. More firms expect to increase employment over the next six months (32 percent) than expect to decrease employment (11 percent). The future employment index increased 11 points to its highest reading in five months. Firms’ expectations for future price increases showed a noteworthy increase this month. The future prices paid and prices received indexes increased 25 points and 6 points, respectively. 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). Although the share of firms that increased their total workforce over the past year (40 percent) narrowly outnumbered those decreasing their workforce (35 percent), the mix of employment changed for many firms. For example, 64 percent of firms indicated that they used temporary or agency workers, and 32 percent indicated that they increased the total share of these workers over the past year. Summary According to respondents to the October Business Outlook Survey, regional manufacturing activity was nearly steady this month. Indicators for growth, although improving from last month, remained at levels that suggest slight growth, at best. Firms maintained nearly steady employment levels this month, but average work hours fell, as in the previous month. Firms continued to expect growth in their manufacturing business over the next six months, and the degree of confidence improved notably from the surveys conducted during the summer months. Special Questions (October 2010) 1. Has your total workforce decreased, increased, or stayed the same over the last year? Decreased 34.6% Stayed the same 13.6% Increased 39.5% No response 12.3% 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| Percentages (excluding nonresponses) Use This Type |_____________________________________________ of Labor | Not | Decreased|No Change|Increased| Total | Used | | Share | Share | |_______|__________|_________|_________|______ Regular Full-Time 100.0 | 0.0 | 31.0 |38.0 | 31.0 | 100.0 Regular Part-Time 73.4 | 26.6 | 10.9 |50.0 | 12.5 | 100.0 Short-Term Worker 52.3 | 47.6 | 3.2 |27.0 | 22.2 | 100.0 On-Call Workers 40.0 | 60.0 | 8.3 |25.0 | 6.7 | 100.0 Temporary or Agency | | | | | Workers 63.5 | 36.5 | 9.5 |22.2 | 31.8 | 100.0 Independent Contract | | | | | Workers 51.6 | 48.4 | 9.7 |30.6 | 11.3 | 100.0 | | | | | Summary of Returns October 2010 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 -0.7 25.4 46.6 24.4 1.0 26.3 53.1 33.0 12.1 41.0 Conditions New Orders -8.1 25.1 44.1 30.1 -5.0 20.7 52.2 33.1 9.2 43.0 Shipments -7.1 21.2 56.8 19.9 1.4 19.8 47.6 31.1 15.3 32.3 Unfilled Orders -8.5 11.5 64.8 20.3 -8.9 -2.9 27.6 49.4 16.2 11.4 Delivery Times -4.1 8.9 76.3 9.2 -0.3 -12.0 9.4 75.9 7.2 2.2 Inventories -16.7 16.5 45.0 35.1 -18.6 -11.6 22.0 51.7 18.3 3.7 Prices Paid 9.8 34.0 58.6 2.5 31.5 21.6 49.2 42.8 2.4 46.7 Prices Received -13.9 6.9 74.9 15.8 -9.0 9.5 24.9 59.4 9.9 15.0 Number of Emp. 1.8 19.7 60.9 17.3 2.4 10.2 31.9 52.0 10.9 21.0 Avg. Emp. Wrkwk -21.6 15.9 59.2 21.9 -6.0 3.4 35.9 50.4 10.2 25.7 Capital Ex. -- -- -- -- -- 11.6 34.4 45.5 13.1 21.4 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 19, 2010. September 2010 Results from the Business Outlook Survey suggest that regional manufacturing activity was nearly flat in September. For the second consecutive month, firms reported a decline in both new orders and shipments. Employment levels remained steady this month, but firms reported declines in average work hours. The survey’s broad indicators of future activity continue to suggest that the region’s manufacturing executives expect growth in business over the next six months, but optimism remains below levels earlier in the year. Indicators Suggest Growth Stalled At End of Summer The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of -7.7 in August to -0.7 in September. The index, which has been negative for two consecutive months, suggests that growth has stalled over the last two months (see Chart). Indexes for new orders and shipments continued to indicate weakness this month: The new orders index fell 1 point, remaining negative for the third consecutive month, and the shipments index decreased 3 points, remaining negative for the second consecutive month. Firms reported declines in inventories and unfilled orders and shorter delivery times. Firms reported near steady employment this month but lower average work hours for existing employees. The percentage of firms reporting increases in employment (18 percent) narrowly edged out the percentage reporting decreases (16 percent). The index for employment was slightly positive this month, increasing 5 points from its negative reading in August. Indicative of weaker activity, more firms reported declines in average work hours for existing employees (30 percent) than reported increases (8 percent). Firms Report Lower Prices for Products On balance, firms reported declines in prices for their own manufactured goods: More firms reported decreases in prices (21 percent) than reported increases (7 percent). Cost pressures continue to ease among the reporting firms. The prices paid index, which edged 2 points lower, to 9.8, has declined 33 points over the last five months and is now at its lowest reading in 13 months. Growth Expected Over Next Six Months But Optimism Has Not Recovered The future general activity index remained positive for the 21st consecutive month and increased 7 points, to a reading of 26.3. The index, however, remains well below levels in the first half of the year (see Chart). Indexes for future new orders and shipments declined slightly, falling 5 and 2 points, respectively. The percentage of firms that expect to increase employment over the next six months (22 percent) is higher than the percentage that expects to decrease employment (12 percent). The future employment index increased 12 points but remains well below its average reading for the year. For this month's special questions, manufacturers were asked about their total production growth for the third quarter (ending in September) and expectations for the fourth quarter (see Special Questions). While 49 percent of the firms said total production would end higher for the third quarter compared with the second quarter, 36 percent indicated it would be lower. The average growth rate among the firms was a tepid 0.6 percent for the quarter. For the upcoming fourth quarter, the percentage of firms that expect a deceleration in production growth (48 percent) is higher than the percentage expecting an acceleration (24 percent). Summary According to respondents to the September Business Outlook Survey, regional manufacturing activity has stalled over the past two months. The broadest indicators of growth —general activity, new orders, and shipments —have all remained slightly negative for at least the last two months. Firms maintained steady employment levels this month but average work hours fell notably, as in the previous month. Despite the evident weakness over the past two months, firms expect growth in their manufacturing business over the next six months. However, the degree of confidence slipped in the third quarter, and, as a group, firms are expecting a slowing in the pace of production growth in the fourth quarter. Special Questions (September 2010) 1. How do you expect your firm’s total production for the third quarter to compare with that of the second quarter?* % Subtotals Increase of more than 10% 13.9 Increase of 8-10% 2.5 Increase of 6-8% 5.1 Increase of 4-6% 11.4 Increase of 2-4% 11.4 Increase of less than 2% 5.1 49.4 Decreases of less than 2% 2.5 Decreases of 1-2% 7.6 Decreases of 2-4% 5.1 Decreases of 4-6% 3.8 Decreases of 6-10% 3.8 Decreases of more than 10% 12.7 35.5 No change 12.7 12.7 Average 0.6% 2. For the upcoming fourth quarter, what growth do you expect for production at your plant compared to the third quarter? Significant acceleration 6.3 Some acceleration 7.6 Slight acceleration 10.1 24.0 Slight deceleration 12.7 Some deceleration 26.6 Significant deceleration 8.9 48.2 No change 25.3 25.3 *Percentages may not add to 100 because a small percentage of firms did not respond to the special questions. Summary of Returns September 2010 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 Busines -7.7 27.0 42.1 27.7 -0.7 19.6 45.3 29.0 19.0 26.3 Conditions New Orders -7.1 24.6 42.4 32.7 -8.1 25.7 42.7 27.8 21.9 20.7 Shipments -4.5 26.7 39.5 33.8 -7.1 21.7 43.0 29.3 23.2 19.8 Unfilled Orders -7.1 16.1 57.7 24.6 -8.5 2.2 17.9 52.7 20.8 -2.9 Delivery Times -11.0 11.0 71.2 15.2 -4.1 0.8 6.3 67.9 18.2 -12.0 Inventories -11.6 6.5 69.4 23.2 -16.7 -16.9 12.8 60.8 24.4 -11.6 Prices Paid 11.8 23.0 61.8 13.2 9.8 30.2 33.5 47.5 11.9 21.6 Prices Received -12.5 6.6 69.1 20.5 -13.9 3.0 23.2 55.0 13.8 9.5 Number of Emp. -2.7 17.9 62.9 16.0 1.8 -1.7 22.2 58.9 12.0 10.2 Avg. Emp. Wrkwk -17.1 7.9 60.7 29.5 -21.6 -3.3 24.4 47.8 21.0 3.4 Capital Ex. -- -- -- -- -- 12.3 21.4 58.1 9.8 11.6 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 14, 2010. August 2010 Results from the Business Outlook Survey suggest that regional manufacturing activity weakened in August, after two months of slowing activity. Indexes for general activity, new orders, and shipments all registered negative readings this month. Firms also reported declines in employment and work hours. The survey’s broad indicators of future activity continue to suggest that the region’s manufacturing executives expect growth in business over the next six months, but optimism has waned notably in recent months. Indicators Suggest Weakness The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a reading of 5.1 in July to -7.7 in August. The index turned negative, marking a period of declining monthly activity for the first time since July 2009 (see Chart). Indexes for new orders and shipments also suggest a slowing this month; the new orders index fell slightly, to -7.1, while the shipments index turned negative, declining to -4.5. Indicating weakness, indexes for both delivery times and unfilled orders remained negative this month. The percentage of firms reporting a decline in employment (23 percent) was higher than the percentage (20 percent) reporting an increase. More concerning was the significant drop in the average employee workweek index from 1.7 in July to -17.1 in August. Firms Report Lower Prices for Products On balance, firms reported declines in prices for their own manufactured goods. More firms reported decreases in prices (19 percent) than reported increases (6 percent). The largest percentage, 70 percent, reported no change in prices for their manufactured goods. Firms reported somewhat less cost pressures over the past three months. The prices paid index decreased 1 point this month, to 11.8. Manufacturers Expect Continued Growth The future general activity index remained positive for the 20th consecutive month but weakened slightly (see Chart). The future new orders index increased to 25.7 and shipments remained unchanged. Information about future inventories suggests that draw-downs are expected in the next six months. The percentage of firms expecting employment to decrease over the next six months (22 percent) slightly exceeded the percentage expecting increases (21 percent). The future employment index decreased 14 points, moving the index into negative territory. In special questions this month, firms were asked about exporting activity and any changes to production outsourcing or “insourcing,” the return of operations from abroad (see Special Questions). About 30 percent of the firms indicated that the share of sales attributed to exports increased over the past year, a trend consistent with the previous two years. Among firms that reported an increase in export share, the mean response indicates that 13.6 percent of sales growth is attributable to exports. Since the start of 2010, roughly 10 percent of firms have moved some activities abroad; only 5 percent have returned activities to the U.S. Summary According to respondents to the August Business Outlook Survey, regional manufacturing activity has weakened, although the new orders and shipments indexes have not fallen significantly. Firms reported that their employment situation has softened; indexes for employment and average hours worked were negative. However, firms expect continued growth in their manufacturing business over the next six months, but that outlook has been somewhat dampened over the past few months. SPECIAL QUESTIONS (August 2010) 1) Over the past year, have exports as a share of your total sales: Aug. 2010 Aug. 2008 Aug. 2007 Increased substantially? 3.2 11.9 10.0 Increased modestly? 27.0 39.0 28.6 Stayed the same? 57.1 47.4 54.3 Decreased modestly? 4.8 1.7 5.7 Decreased substantially? 7.9 0.0 1.4 2) If your exports are currently growing, what percent of your sales growth is attributable to exports? Aug. 2010 Aug. 2008 Aug. 2007 Mean response: 13.6 25.3 18.9 3) Since the beginning of the year, have you outsourced or moved any of your activities or production abroad? Aug. 2010 Aug. 2008 Yes: 9.7 11.1 No: 90.3 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.? Aug. 2010 Aug. 2008 Yes: 4.5 6.2 No: 95.5 93.8 August 2010 August vs. July Six Months from now vs. August Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Busines 5.1 17.9 49.1 25.6 -7.7 25.0 35.3 39.3 15.7 19.6 Conditions New Orders -4.3 22.8 45.9 29.8 -7.1 17.9 40.0 36.2 14.4 25.7 Shipments 4.0 21.7 49.1 26.2 -4.5 21.7 39.3 34.7 17.6 21.7 Unfilled Orders -8.6 14.5 61.0 21.6 -7.1 -3.7 18.2 59.2 15.9 2.2 Delivery Times -8.1 7.6 69.3 18.6 -11.0 -11.6 14.7 62.8 13.9 0.8 Inventories 4.5 12.5 58.6 24.0 -11.6 -13.8 19.4 37.5 36.3 -16.9 Prices Paid 13.1 21.6 65.7 9.9 11.8 27.5 39.4 44.6 9.2 30.2 Prices Received -8.4 6.3 69.9 18.9 -12.5 10.1 21.8 53.7 18.8 3.0 Number of Emp. 4.0 20.0 51.5 22.7 -2.7 12.6 20.7 50.9 22.4 -1.7 Avg. Emp. Wrkwk 1.7 11.6 54.3 28.8 -17.1 9.5 15.0 59.6 18.3 -3.3 Capital Ex. -- -- -- -- -- 8.6 32.0 39.8 19.7 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 August 17, 2010. July 2010 Results from the Business Outlook Survey suggest that regional manufacturing activity continues to expand in July but has slowed over the past two months. Surveyed firms reported a decline in new orders this month compared with June. Employment showed a slight improvement this month. The survey’s broad indicators of future activity continue to suggest that the region’s manufacturing executives expect growth in business over the next six months, but optimism has waned notably in recent months. Indicators Suggest Slower Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a reading of 8 in June to 5.1 in July. The index, although still positive and suggesting growth, has fallen for two consecutive months (see Chart). Indexes for new orders and shipments also suggest a slowing this month: The new orders index fell 13 points, to its first negative reading in 12 months, and the shipments index decreased 10 points but remained positive. Indicating weakness, indexes for both delivery times and unfilled orders fell and were in negative territory this month. Firms indicated a slight increase in employment this month. The percentage of firms reporting increases in employment (13 percent) narrowly edged out the percentage of firms reporting decreases (9 percent). Indexes for both employment and average workweek were slightly positive this month after registering negative readings in June. Firms Report Lower Prices for Products On balance, firms reported declines in prices for their own manufactured goods: Slightly more firms reported decreases in prices (16 percent) than reported increases (8 percent). The largest percentage, 76 percent, reported no change in prices for their manufactured goods. Firms reported somewhat less cost pressures over the past two months. Although the prices paid index increased 3 points this month, it remains 22 points below its reading of just two months ago. Manufacturers Expect Continued Growth The future general activity index remained positive for the 19th consecutive month but fell 15 points, to a reading of 25.0, its lowest in 16 months (see Chart). The future new orders and shipments indexes also declined notably, falling 22 and 13 points, respectively. For the 15th consecutive month, the percentage of firms expecting employment to increase over the next six months (30 percent) exceeded the percentage expecting declines (17 percent). The future employment index decreased 7 points and is at its lowest level in eight months. In special questions this month, firms were asked about seasonal plant shutdowns or slowdowns during the summer (see Special Questions). About 25 percent of the surveyed firms indicated that it was normal to schedule such slowdowns during the summer months, nearly the same as in the previous year. About one-third indicated that they would schedule them this year, compared with 49 percent last year. Forty-eight percent of the firms scheduling shutdowns/slowdowns indicated that production decreases for July would be greater than usual; however, 62 percent indicated so last year. Nearly 44 percent indicated production declines for August would be greater than usual, compared with 49 percent last year. Summary According to respondents to the July Business Outlook Survey, regional manufacturing activity continues to expand, but indicators for new orders and shipments have been suggesting a slowdown over the past two months. Firms reported declines in prices for their products and some moderation in input price pressures over the past few months. Firms expect continued growth in their manufacturing business over the next six months, but along with a slide in current indicators, confidence slipped noticeably this month. SPECIAL QUESTIONS (July 2010) 1) Do you normally schedule seasonal plant shutdowns or production slowdowns during the summer months? 2010 2009 2006 Yes 25.4 27.6 30.2 No 71.6 71.1 64.0 NR 3.0 1.3 5.8 2) Will you schedule plant shutdowns or production slowdowns during the summer months this year? 2010 2009 2006 Yes 32.8 48.7 33.7 No 65.7 50.0 59.3 NR 1.5 1.3 7.0 If yes, which of the following best characterizes your expected shutdowns/slowdowns for this month and next? 2010 2009 2006 July August July August July August Production decreases greater than usual 47.8 43.8 62.2 48.6 41.4 17.2 Production decreases about the same as usual 43.5 31.3 27.0 21.6 44.8 41.4 Production decreases less than usual 4.3 6.2 5.4 2.7 13.8 6.9 Unsure/too early to predict 4.3 18.7 0.0 13.5 -- -- NR -- -- 5.4 13.5 0.0 34.5 Summary of Returns July 2010 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 Busines 8.0 27.6 48.7 22.5 5.1 40.2 41.1 40.1 16.1 25.0 Conditions New Orders 9.0 29.1 37.0 33.4 -4.3 39.7 40.8 33.1 22.9 17.9 Shipments 14.2 28.6 45.7 24.5 4.0 34.2 41.5 36.1 19.8 21.7 Unfilled Orders -0.1 15.7 57.1 24.3 -8.6 9.2 21.2 50.6 24.9 -3.7 Delivery Times 6.8 13.5 63.0 21.5 -8.1 -8.3 12.0 61.3 23.6 -11.6 Inventories 4.6 23.8 56.8 19.3 4.5 1.8 17.2 49.9 31.0 -13.8 Prices Paid 10.0 24.6 63.9 11.5 13.1 28.3 37.3 52.8 9.8 27.5 Prices Received -6.5 7.7 76.1 16.2 -8.4 17.0 26.8 55.1 16.7 10.1 Number of Emp. -1.5 13.2 77.4 9.2 4.0 19.5 29.8 53.1 17.2 12.6 Avg. Emp. Wrkwk -1.5 20.0 61.8 18.2 1.7 25.2 26.5 49.7 17.0 9.5 Capital Ex. -- -- -- -- -- 3.0 31.3 40.5 22.7 8.6 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 July 13, 2010. June 2010 Results from the Business Outlook Survey suggest that regional manufacturing activity continues to expand in June, but at a slower pace than in May. Surveyed firms reported no expansion of overall employment and work hours compared with May. Fewer firms also reported increases in prices of inputs this month. The survey’s broad indicators of future activity continued to suggest that the region’s manufacturing executives still expect growth in business over the next six months. Some Indicators Suggest Slower Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased notably from a reading of 21.4 in May to 8.0 in June. The index, which had edged higher for four consecutive months, fell back to its lowest reading in 10 months (see Chart). Although still positive and suggesting growth, indexes for new orders and shipments showed a mixed pattern this month — the new orders index increased 3 points, while the shipments index decreased 2 points. The current inventory index increased 13 points and moved back from a negative reading into positive territory, suggesting an increase in inventories this month. Until this month, firms’ responses had been suggesting that labor market conditions were improving, but indexes for current employment and work hours were both slightly negative. For the first time in seven months, more firms reported a decrease in employment (18 percent) than reported an increase (17 percent). The largest percentage (62 percent), however, reported steady employment levels. The workweek index also declined into negative territory, its first negative reading in eight months. Firms Report Reduced Cost Pressures Nineteen percent of firms reported higher input prices this month, down significantly from 39 percent last month. The prices paid index decreased 26 points but remains positive, now at 10.0. On balance, firms reported declines in their own manufactured goods — slightly more firms reported decreases in their prices (15 percent) than reported increases (9 percent). The largest percentage, 71 percent, reported no change in the prices of their manufactured goods. The prices received index fell 10 points, to -6.5, its lowest reading in nine months. The future general activity index remained positive for the 18th consecutive month and increased slightly from 37.0 in May to 40.2 (see Chart). The future new orders and shipments indexes remain at high levels, although they fell 9 points and 6 points, respectively. For the 14th consecutive month, the percentage of firms expecting employment to increase over the next six months (33 percent) exceeded the percentage expecting declines (13 percent). The future employment index, however, decreased 11 points and is at its lowest reading in four months. In special questions this month, firms were asked about the probability that they would relocate some or all of their operations out of the tri-state region over the next five years (see Special Questions). The average probability of relocating was 12 percent, a decline from 20 percent last year. The average probability of relocating all operations was 4.2 percent, which was little changed from previous surveys. Firms were also asked to rank the factors that were influencing them to leave or stay in the region. According to the firms’ responses, the two most important factors influencing the decision to leave are (1) the cost of labor and (2) taxes, subsidies, or regulations. The two most important factors influencing the decision to stay in the region are existing investment in fixed capital and the availability of skilled workers. Summary According to respondents to the June Business Outlook Survey, regional manufacturing activity continues to expand. A few indicators, including employment, suggest a slower pace of growth this month. Firms also reported a moderation in cost pressures this month, and more firms reported price reductions than reported increases for their own manufactured goods. Firms expect continued growth in their manufacturing business over the next six months, with over half of the firms expecting growth in activity, new orders, and shipments. Special Questions (June 2010) 1) What is the probability that you will relocate some or all of your operations out of the tri-state region over the next five years? Average Probability (%) 2010 2009 2007 2006 Probability of relocating some operations: 12.1 20.2 26.9 15.9 Probability of relocating all operations: 4.2 5.4 5.4 1.9 2) How important are the following factors in influencing your firm’s decision about leaving the tri-state region? Very or Most Relevant For Leaving (% of respondents)* 2010 2009 2007 Cost of labor 64.5 73.4 84.4 Taxes/subsidies and/or regulations 56.3 67.9 66.0 Availability of skilled workers 50.0 55.6 63.8 Cost of energy (electricity, oil, gas, etc.) 41.7 54.0 52.2 Proximity to customers 33.3 41.3 38.3 Proximity to suppliers or raw materials 12.5 20.6 21.7 3) How important are the following factors in influencing your decision to stay in the tri-state region? Very or Most Relevant For Staying (% of respondents)* 2010 2007 Heavily invested in fixed capital 71.6 72.4 Availability of skilled workers 54.1 57.3 Costs of labor 37.8 45.2 Taxes/subsidies and/or regulations 32.4 33.8 Proximity to customers 29.7 48.7 Cost of energy (electricity, oil, gas, etc.) 21.6 33.3 Proximity to suppliers or raw materials 10.8 20.5 *Firms were asked to choose one of the following categories for each factor: “not relevant,” “somewhat relevant,” “very relevant,” or “most relevant.” Summary of Returns June 2010 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 21.4 26.1 55.7 18.1 8.0 37.0 51.9 36.5 11.7 40.2 Conditions New Orders 6.1 30.8 46.7 21.8 9.0 48.4 54.4 28.5 14.7 39.7 Shipments 15.8 30.3 53.6 16.1 14.2 40.5 51.0 30.5 16.8 34.2 Unfilled Orders -3.0 18.7 61.6 18.8 -0.1 4.0 24.6 55.7 15.3 9.2 Delivery Times -1.2 16.0 74.7 9.3 6.8 -2.7 13.3 63.7 21.6 -8.3 Inventories -7.9 20.6 60.3 16.0 4.6 -2.0 25.3 48.6 23.5 1.8 Prices Paid 35.5 19.2 70.6 9.3 10.0 31.3 39.2 46.1 10.9 28.3 Prices Received 3.5 8.5 70.8 15.0 -6.5 15.8 30.3 54.1 13.2 17.0 Number of Emp. 3.2 16.8 61.6 18.3 -1.5 30.1 32.9 40.7 13.4 19.5 Avg. Emp. Wrkwk 7.0 12.5 70.4 14.1 -1.5 14.6 33.0 52.8 7.8 25.2 Capital Ex. -- -- -- -- -- 7.7 19.9 60.2 16.9 3.0 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 June 15, 2010. May 2010 According to the firms polled for this month’s Business Outlook Survey, regional manufacturing activity continues to expand. Firms reported some expansion of overall employment again this month. The survey’s broad indicators of future activity continue to suggest that the region’s manufacturing executives expect growth in business over the next six months. Indicators Suggest Continued Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased slightly from 20.2 in April to 21.4 this month. The index has now edged higher for four consecutive months and has remained positive for the ninth consecutive month (see Chart). Although still positive and suggesting growth, indexes for new orders and shipments showed a mixed pattern this month: The new orders index fell 8 points, while the shipments index increased 10 points. The current inventory index decreased 10 points and fell into negative territory, suggesting declines in inventories. Indexes for unfilled orders and delivery times were both negative this month, suggesting some weakening in activity from April. Firms’ responses continue to suggest that labor market conditions are improving, but indexes for current employment and work hours fell from their readings in April. For the sixth consecutive month, more firms reported an increase in employment (21 percent) than reported a decline (17 percent). The workweek index declined slightly but has now remained positive for seven consecutive months. Firms Report Cost Pressures and Prices of Manufactured Goods Are Near Steady Thirty-nine percent of firms reported higher input prices this month, down somewhat from 44 percent last month. The prices paid index decreased 7 points. On balance, however, firms reported near-steady prices for their own manufactured goods: The percentage of firms reporting increases in their prices (17 percent) was only slightly higher than the percentage reporting decreases (13 percent). The largest percentage, 66 percent, reported no change in the prices of their manufactured goods. The prices received index, however, crept nearly 3 points higher, to 3.5. Manufacturing Executives Are Still Optimistic Overall The future general activity index remained positive for the 17th consecutive month, although it fell from 44.2 in April to 37.0 this month (see Chart). The future new orders and shipments indexes remain at high levels, although they moved in different directions: The future shipments index decreased 2 points, while the future new orders index increased 2 points. For the 13th consecutive month, the percentage of firms expecting employment to increase over the next six months (37 percent) exceeded the percentage expecting declines (7 percent). The future employment index increased 8 points and is at its highest reading since May 2004. In special questions this month, firms were asked about their short-run production situation as well as their plans for hiring workers (see Special Questions). While 59 percent of firms expect to increase production over the next six months, far less (30 percent) expect to hire additional workers to accommodate production increases; the remaining firms indicated that they will increase work hours or increase productivity without hiring. Responding firms cited uncertainty about future product demand and the cost of future employment (health-care costs, wages, etc.), followed by excess capacity and a lack of demand for products as the most important factors for not hiring, in general. Summary According to respondents to the May Business Outlook Survey, regional manufacturing activity continues to expand. All of the survey’s broad indicators remained positive, and the responding firms reported some expansion in employment. Many firms, however, pointed to uncertainty about product demand and the cost of hiring workers, as well as low capacity utilization, as reasons for not increasing employment. Firms expect continued growth over the next six months, with well over half of the firms expecting growth in activity, new orders, and shipments. Special Questions (May 2010) 1. Which of the following characterizes your short-run production and employment situation? % of total respondents We do not expect to increase production in the next six months. 37.5 We expect to increase production in the next six months. 58.8 No response 3.8 2. If you expect to increase production over the next six month, this will be accomplished by: Hiring additional workers 30.0 Increasing work hours of current staff, without additional hiring 25.0 Increasing productivity of current staff, without hiring 8.0 No response 36.3 3. If you are not hiring additional workers, which of the following reasons are most relevant for not hiring? % of total respondents --------------------------------------------- Most Not No important Important Important Response Lack of demand for products 18.8 17.5 8.8 54.9 Plant operating below capacity 21.3 18.8 8.8 51.1 Uncertainty about future product demand 25.0 21.3 5.0 48.7 Cost of future employment (health-care costs, wages, etc.) 25.0 22.5 3.8 48.7 Other 6.3 0.0 1.3 92.4 Summary of Returns May 2010 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 20.2 31.9 53.8 10.5 21.4 44.2 52.6 24.4 15.6 37.0 Conditions New Orders 13.9 28.5 48.6 22.4 6.1 46.5 59.9 22.4 11.5 48.4 Shipments 5.6 30.9 52.9 15.1 15.8 42.8 56.3 19.0 15.8 40.5 Unfilled Orders -0.9 13.1 68.5 16.1 -3.0 24.6 18.1 54.7 14.1 4.0 Delivery Times 5.4 8.9 81.0 10.1 -1.2 11.3 13.7 59.7 16.4 -2.7 Inventories 2.0 15.8 59.2 23.7 -7.9 8.6 22.2 46.8 24.2 -2.0 Prices Paid 42.7 39.3 52.7 3.8 35.5 50.6 41.8 40.9 10.5 31.3 Prices Received 1 16.6 66.3 13.1 3.5 23.6 27.7 49.4 11.9 15.8 Number of Emp. 7.3 20.6 62.0 17.4 3.2 22.0 37.1 45.7 7.0 30.1 Avg. Emp. Wrkwk 8.3 21.4 57.3 14.5 7.0 15.6 30.6 40.3 16.0 14.6 Capital Ex. -- -- -- -- -- 10.2 23.6 52.2 15.9 7.7 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 data reflect information received through May 18, 2010. April 2010 The expansion of the region’s manufacturing sector is continuing, according to firms polled for this month’s Business Outlook Survey. The broadest survey measures remained positive this month, with measures of general activity and new orders showing a slight improvement from March. More firms reported higher input prices this month, but prices for manufactured goods remained nearly steady. The survey’s broad indicators of future activity continued to suggest that the region’s manufacturing executives expect business activity to increase over the next six months. Indicators Suggest Continued Growth The survey’s broadest measure of manufacturing conditions, the index of current activity, increased from a reading of 18.9 in March to 20.2 this month. The index has now increased for three consecutive months and remained positive for eight consecutive months (see Chart). Although still positive and suggesting growth, indexes for new orders and shipments showed a mixed pattern this month. The new orders index increased 5 points, while the shipments index fell 8 points. The current inventory index increased 13 points and has now recorded positive readings in two of the last three months. Firms’ responses continue to suggest that labor market conditions are improving. For the fifth consecutive month, the percentage of firms reporting an increase in employment (24 percent) was higher than the percentage reporting declines (17 percent). The workweek index was essentially unchanged and has now remained positive for six consecutive months. Prices for Manufactured Goods Are Steady, Although Input Prices Are Trending Up More firms have been reporting higher costs for inputs over the past several months. Forty-four percent of firms reported higher prices paid, up from 39 percent last month. The prices paid index increased 4 points, its second consecutive month of increase. On balance, firms reported near-steady prices for their own manufactured goods: The percentage of firms reporting increases (14 percent) was nearly the same as the percentage reporting decreases (13 percent). The largest percentage, 73 percent, reported no change in the prices of their manufactured goods. Manufacturers Remains Optimistic The future general activity index remained positive for the 16th consecutive month, although it fell from 52.0 in March to 44.2 in April (see Chart). The future new orders and shipments indexes changed only slightly and remain at high levels. For the 12th consecutive month, the percentage of firms expecting employment to increase over the next six months (34 percent) exceeded the percentage expecting declines (12 percent). Firms continue to forecast increases in inventories, unfilled orders, and delivery times. The planned capital spending index was virtually unchanged this month; 27 percent of firms expect an in-crease in capital spending over the next six months and 17 percent expect a decrease. In special questions, firms were asked about credit conditions and their impact on operations (see Special Questions). Slightly more firms indicated that credit conditions have eased (16 percent) over the last six months; 13 percent believe conditions have tightened. About 26 percent of the firms indicated that they are having difficulty obtaining financing for long-term uses such as capital spending, only slightly lower than the percentage when the question was asked one year ago. Moreover, almost 19 percent of the firms indicated difficulty obtaining credit for financing short-term uses such as paying workers or acquiring inventories, which is also slightly lower than one year ago. Only 10 percent of the responding firms indicated that difficulty obtaining credit had reduced production or sales, which was lower than the 16 percent who indicated so one year ago. Summary According to respondents to the April Business Outlook Survey, regional manufacturing activity continues to expand. All of the survey’s broad indicators remained positive and firms reported a slight pickup in orders and activity. Firms expect continued growth over the next six months. Over half of the firms expect increases in new orders and shipments over the next six months and over one-third expect an expansion of employment. Special Questions (April 2010) 1. How do borrowing conditions compare to those six months ago? (%) Eased substantially 0.0 Eased somewhat 15.7 No change 51.4 Tightened somewhat 12.9 Tightened substantially 0.0 NR 20.0 2. To what extent is your business having difficulty obtaining financing for desired long-term uses such as capital expenditures? April 2010 (%) April 2009 (%) No difficulty 57.1 58.4 Some difficulty 15.7 18.1 Substantial difficulty 1.4 6.5 Extreme difficulty 8.6 2.6 NR 17.2 14.4 3. To what extent is your business having difficulty obtaining financing for desired short-term uses such as paying workers and acquiring inventories of material or supplies? April 2010 (%) April 2009 (%) No difficulty 65.7 66.2 Some difficulty 11.5 11.7 Substantial difficulty 1.4 7.8 Extreme difficulty 5.7 2.6 NR 15.7 11.7 4. Have problems obtaining credit for either long-term uses or short-term uses reduced your firm's production and/or sales? April 2010 (%) April 2009 (%) Yes 10.0 15.6 No 74.3 61.0 NR 15.7 23.4 April 2010 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 18.9 38.1 43.1 17.9 20.2 52.0 53.5 32.4 9.3 44.2 Conditions New Orders 9.3 35.4 43.0 21.6 13.9 45.2 55.9 30.8 9.4 46.5 Shipments 13.6 28.6 47.0 23.0 5.6 44.3 53.9 31.7 11.2 42.8 Unfilled Orders -4.9 19.7 59.1 20.7 -0.9 18.6 31.4 56.2 6.9 24.6 Delivery Times 7.9 14.4 76.6 9.0 5.4 0.7 22.8 63.9 11.5 11.3 Inventories -11.0 19.8 62.1 17.8 2.0 8.1 26.5 52.3 18.0 8.6 Prices Paid 38.6 44.3 54.0 1.6 42.7 54.1 53.6 39.3 3.0 50.6 Prices Received -0.4 14.1 72.5 13.1 1.0 22.9 37.1 46.0 13.5 23.6 Number of Emp. 8.4 24.1 58.7 16.8 7.3 24.4 34.4 48.8 12.3 22.0 Avg. Emp. Wrkwk 7.6 30.1 48.2 21.8 8.3 28.6 32.2 45.1 16.5 15.6 Capital Ex. -- -- -- -- -- 9.7 27.3 53.9 17.1 10.2 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 April 13, 2010. March 2010 The region’s manufacturing sector is continuing to show signs of growth, according to firms polled for this month’s Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment all remained positive this month. The survey’s broad indicators of future activity continued to suggest that the region’s manufacturing executives expect business activity to increase over the next six months. Indicators Suggest Continued Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of 17.6 in February to 18.9 this month. The index has now remained positive for seven consecutive months (see Chart). Although still positive and suggesting growth, indexes for current new orders and shipments fell back from their readings in February: The new orders index fell 13 points, and the shipments index fell 6 points. The current inventory index moved back into negative territory after recording its first positive reading since September 2007 last month. Firms’ responses continued to suggest that labor market conditions have been stabilizing in recent months. For the fourth consecutive month, the percentage of firms reporting an increase in employment is greater than the percentage reporting declines. The current employment index edged 1 point higher and is at its highest reading since October 2007, yet only 17 percent of the firms reported an increase in employment this month. The workweek index was 6 points higher and has now remained positive for five consecutive months. Prices for Manufactured Goods Are Steady, Although Higher Costs Reported Respondents have been reporting higher costs for inputs over the past six months. Thirty-nine percent of firms reported higher prices paid; no firms reported lower prices paid. On balance, however, firms reported near-steady prices for their own manufactured goods: The percentage of firms (13 percent) reporting increases was the same as that reporting decreases. The largest percentage, 74 percent, reported no change in prices for their manufactured goods. Firms’ Outlook Remains Optimistic The future general activity index remained positive for the 15th consecutive month and increased from 35.8 in February to 52.0 in March (see Chart). The future new orders index edged 4 points higher, but the future shipments index fell 7 points. For the 11th consecutive month, the percentage of firms expecting employment to increase over the next six months (33 percent) exceeded the percentage expecting declines (9 percent). Firms continue to forecast increases in unfilled orders, delivery times, and inventories. The planned capital spending index fell 16 points, after reaching its highest reading in almost three years last month. In special questions this month, firms were asked about their expectations for production growth for the upcoming second quarter (see Special Questions). Nearly 57 percent of the firms expect increases in production in the second quarter; 17 percent expect decreases. This is in contrast to the situation in March of last year, when more firms were expecting declines in production than were expecting increases. Forty-eight percent of the firms said second-quarter production growth would represent an acceleration in growth (although only 7 percent characterized it as “significant acceleration”); 17 percent said the expected growth represented deceleration. Summary According to respondents to the March Business Outlook Survey, regional manufacturing activity continues to expand. Although indicators for new orders and shipments moderated from February, all of the broad indicators remained positive. Firms expect continued growth over the next six months, and nearly half indicated that they expect their rate of production to accelerate during the second quarter. Special Questions (March 2010) 1. What change, if any, do you anticipate in your firm’s production during the second quarter of 2010 compared to the first quarter? 2010 2009 Decrease of more than 5% 8.7% Decrease of 3-5% 5.8% Decrease of less than 3% 2.9% Total decrease 17.4% 44.5% No change 26.1% Increase of less than 3% 10.2% Increase of 3-5% 15.9% Increase of more than 5% 30.4% Total increase 56.5% 34.9% 2010: Average 1.8% Median: 1.5% 2009: Average: -2.4% Median: 0.0% 2. Would this represent an acceleration or deceleration of growth from the first quarter of 2010? Significant deceleration 4.2% Some deceleration 12.7% Total decleration 16.9% No change 26.8% Some acceleration 40.8% Significant acceleration 7.0% Total acceleration 47.8% 3. Does the expected increase or decrease reflect seasonal factors or a change in business conditions? Seasonal 32.4% Expected changes in business conditions 39.4% Other 2.8% Percentages may not add to 100 percent because some firms did not respond to every question. Summary of Returns March 2010 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 17.6 34.5 49.4 15.6 18.9 35.8 60.0 30.8 7.9 52.0 Conditions New Orders 22.7 29.6 48.7 20.4 9.3 41.3 55.0 34.2 9.8 45.2 Shipments 19.7 30.5 52.7 16.8 13.6 51.0 52.0 39.4 7.8 44.3 Unfilled Orders -7.5 16.8 61.4 21.7 -4.9 14.1 31.4 55.8 12.8 18.6 Delivery Times -2.1 14.9 76.5 7.0 7.9 9.0 10.3 78.7 9.6 0.7 Inventories 3.2 12.7 63.7 23.6 -11.0 15.4 29.8 47.8 21.7 8.1 Prices Paid 32.4 38.6 60.0 0.0 38.6 51.2 60.2 33.7 6.1 54.1 Prices Received 3.7 12.8 73.7 13.2 -0.4 26.4 32.2 58.5 9.3 22.9 Number of Emp. 7.4 16.6 75.2 8.2 8.4 13.8 33.0 56.5 8.7 24.4 Avg. Emp. Wrkwk 1.9 21.9 63.8 14.3 7.6 23.9 35.9 56.9 7.2 28.6 Capital Ex. -- -- -- -- -- 26.0 22.1 65.6 12.3 9.7 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 data reflect information received through March 15, 2010. February 2010 Manufacturing conditions continue to improve in the region, according to firms polled for this month’s Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment all remained positive this month and increased from their readings in January. Firms reported a notable pickup in new orders this month. Overall, firms remain generally optimistic about growth for the manufacturing sector over the next six months. Indicators Suggest Pickup in Demand The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of 15.2 in January to 17.6 this month. The index has now remained positive for six consecutive months (see Chart). There was a notable increase in the current new orders index suggesting an improvement in demand for manufactured goods — the new orders index increased 20 points. The current shipments index increased 9 points. The current inventory index increased 5 points, to its first positive reading since September 2007. Firms’ responses continued to suggest that labor market conditions have been stabilizing in recent months. For the third consecutive month, more firms reported an increase in employment than reported declines. The current employment index edged 1 point higher and remains at its highest reading since October 2007. The workweek index was 2 points lower but remained slightly positive for the fourth consecutive month. Manufactured Goods Prices Remain Steady Despite Higher Costs Respondents have been reporting higher costs for inputs in recent months. Thirty-four percent of firms reported higher prices paid, while 2 percent reported lower prices paid. On balance, however, firms reported near-steady prices for their own manufactured goods. The largest percentage, 77 percent, reported no change in the prices of their manufactured goods. The percentage of firms reporting higher prices (13 percent) was only slightly greater than the percentage reporting lower prices (9 percent). Manufacturers Remain Optimistic The future general activity index remained positive for the 14th consecutive month but dipped from 43.3 in January to 35.8 (see Chart). Indexes for future new orders and shipments also remained at relatively high levels. The future new orders index edged down 3 points, but the future shipments index increased by 11 points. For the tenth consecutive month, the percentage of firms expecting employment to increase over the next six months (31 percent) exceeded the percentage expecting declines (17 percent). Firms continue to forecast increases in inventories, unfilled orders, and delivery times. The planned capital spending index rose 9 points to its highest reading in almost three years. In special questions this month, firms were asked about their current inventory situation (see Special Questions). Nearly 57 percent of firms indicated that their level of inventories was about right for current conditions. Eighteen percent of the firms indicated inventories would rise in the first quarter. Nearly 21 percent of firms indicated inventories would be reduced in the first quarter: When the same question was posed one year ago, a much higher percentage (44 percent) indicated inventories were too high and were expected to decrease. Inventory reductions of firms’ customers have diminished significantly since the same time last year; 21 percent of firms indicated that their customers’ inventories have declined in recent months, but that is significantly lower than the 67 percent of firms that indicated customers were reducing inventories at the same time last year. Summary According to respondents to the February Business Outlook Survey, regional manufacturing activity continues to expand. All of the broad indicators showed some improvement from the previous month, with a notable pickup in new orders. Firms expect continued growth through the first half of 2010. There was also an improvement in capital spending plans. Special Questions (February 2010) 1. Choose the statement that best characterizes your current inventory situation. Inventories are: (% of respondents) Feb 2010 Feb 2009 About right for current economic conditions 56.9 43.9 Too low and are expected to increase in the first quarter 11.1 3.7 Too high and are expected to increase in the first quarter 6.9 6.1 Too high and are expected to decrease in the first quarter 18.1 43.9 Too low and are expected to decrease in the first quarter 2.8 0.0 2. Over the past several months, did your customers' inventory plans: Feb 2010 Feb 2009 Increase 11.1 3.7 Not change 51.4 18.3 Decrease 20.8 67.1 Note: Percentages may not add to 100% because of no responses for some questions. Summary of Returns February 2010 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 15.2 33.1 51.3 15.6 17.6 43.3 48.0 35.5 12.2 35.8 Conditions New Orders 3.2 34.2 53.9 11.4 22.7 44.6 54.0 31.8 12.8 41.3 Shipments 11.0 33.7 49.0 14.0 19.7 39.8 59.9 27.7 8.9 51.0 Unfilled Orders 3.6 11.2 68.8 18.7 -7.5 17.4 24.3 63.7 10.2 14.1 Delivery Times 6.6 10.5 74.9 12.5 -2.1 9.4 14.9 75.3 5.9 9.0 Inventories -1.6 21.1 60.9 17.9 3.2 10.2 30.8 48.6 15.4 15.4 Prices Paid 33.2 33.9 63.5 1.5 32.4 47.0 52.8 40.3 1.6 51.2 Prices Received 2.7 12.7 76.6 9.0 3.7 15.4 34.0 55.5 7.6 26.4 Number of Emp. 6.1 19.3 68.7 11.8 7.4 14.4 30.6 52.5 16.9 13.8 Avg. Emp. Wrkwk 4.2 16.0 67.2 14.1 1.9 22.4 33.5 55.4 9.7 23.9 Capital Ex. -- -- -- -- -- 16.8 34.6 50.7 8.6 26.0 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 February 17, 2010. January 2010 The region’s manufacturing sector continues to show improvement, according to firms polled for this month’s Business Outlook Survey. Indexes for general activity, new orders, and shipments all remained positive this month, although each fell back somewhat from their revised readings in December. Also indicative of improvement, for the second consecutive month, the percentage of firms reporting increases in employment was higher than the percentage reporting declines. Overall, expectations improved in January, and firms remain generally optimistic about growth over the next six months. Indicators Suggest Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a revised reading of 22.5 in December to 15.2 this month.* The index has now remained positive for five consecutive months (see Chart). Indicators for new orders and shipments suggest continued growth this month, but they also declined somewhat from their December readings. The current new orders index, which has remained positive for six consecutive months, decreased 5 points. The current shipments index fell 4 points. The current inventory index, although still negative, increased 4 points, to its highest reading in 26 months. Indicators for unfilled orders and delivery times edged higher and are both positive, suggesting stronger economic conditions. Labor market conditions have been stabilizing in recent months, and for the second consecutive month, the percentage of firms reporting an increase in employment was higher than the percentage reporting declines. The current employment index increased 2 points, to its highest reading since February 2008. The workweek index fell back 2 points but has now been positive for three consecutive months. Most Firms Report Steady Prices, Despite Higher Costs Respondents have been reporting higher costs for inputs in recent months. The prices paid index, which showed a notable increase of 14 points last month, fell back 3 points. But over one-third of firms reported higher prices paid, while less than 1 percent reported lower prices paid. On balance, however, firms reported near-steady prices for their own manufactured goods. The largest percentage, 85 percent, reported no change in the prices of their manufactured goods. The percentage of firms reporting higher prices (9 percent) was nearly offset by the percentage reporting lower prices (6 percent). Manufacturers’ Forecasts Improve The future general activity index remained positive for the 13th consecutive month and increased notably from a revised reading of 35.9 in December to 43.3 (see Chart). Indexes for future new orders and shipments also improved this month, increasing 12 points and 6 points, respectively. For the ninth consecutive month, the percentage of firms expecting employment to increase over the next six months (28 percent) exceeded the percentage expecting declines (14 percent). Firms also forecast increases in inventories, unfilled orders, and delivery times. In this month’s special questions, firms were asked to characterize demand for their products over the past three months (see Special Questions). The improvement in manufacturing was evident in their responses, since the percentage of firms indicating an increase in demand was higher than the percentage indicating a decrease. Nearly 35 percent of firms indicated that demand had increased modestly over the last three months, and 7 percent indicated significant increases in demand. Only 15 percent indicated modest declines, while 7 percent reported significant decreases. When asked to compare current demand with what was expected three months ago, 26 percent of firms indicated that demand is greater than expected; 17 percent indicated it is less than expected. Firms were nearly evenly divided in their responses to a question about whether their forecast for the first half was more certain or less certain than six months ago. Summary According to respondents to the January Business Outlook Survey, manufacturing activity is still rising, even though some measures fell back somewhat from their readings at year-end. Special questions corroborated reported improvement in demand for manufactured goods in recent months. Firms expect continued growth over the first half of 2010, and most indicators for future growth showed improvement this month. * The survey’s annual historical revisions, which incorporate new seasonal adjustment factors, were released on January 14, 2010. Special Questions (January 2010) 1. Over the past three months how would you characterize the underlying demand for your manufactured products? Exclude any purely seasonal effect. Increase significantly 7.4% Increase modestly 34.6% No change 33.3% Decrease modestly 14.8% Decrease significantly 7.4% 2. How does the current underlying demand for your products compare to what you expected three months ago? Less than expected 17.3% About what was expected 55.6% Greater than expected 25.9% 3. How would you characterize the level of certainty regarding your forecast for business growth over the next six months? Less certain than six months ago 23.5% No difference from six months ago 43.2% More certain than six months ago 24.7% Percentages may not add to 100 percent because some firms did not respond to every question. Summary of Returns January 2010 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 22.5 28.7 56.7 13.5 15.2 35.9 50.0 41.4 6.7 43.3 Conditions New Orders 8.3 28.3 46.6 25.1 3.2 32.8 51.8 38.7 7.2 44.6 Shipments 14.9 28.3 53.1 17.3 11.0 33.7 47.8 43.2 8.0 39.8 Unfilled Orders 1.7 15.1 73.5 11.4 3.6 9.8 28.1 61.3 10.6 17.4 Delivery Times 4.1 13.3 79.9 6.8 6.6 -3.2 16.9 75.6 7.5 9.4 Inventories -5.7 17.3 63.9 18.8 -1.6 -0.5 27.7 54.5 17.5 10.2 Prices Paid 36.6 33.5 66.2 0.3 33.2 34.4 50.9 44.1 3.9 47.0 Prices Received 1.4 8.9 85.0 6.2 2.7 19.1 26.4 61.2 11.0 15.4 Number of Emp. 4.5 18.8 68.5 12.7 6.1 15.1 27.9 56.3 13.5 14.4 Avg. Emp. Wrkwk 6.3 18.9 65.9 14.7 4.2 22.5 33.5 52.7 11.1 22.4 Capital Ex. -- -- -- -- -- 13.2 24.5 60.7 7.7 16.8 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 data reflect information received through January 19, 2010.