December 2011 Responses to the Business Outlook Survey this month suggest that regional manufacturing continued to improve in December. All of the broad indicators remained positive and suggest a modest expansion of activity. Increases in input prices were more widespread this month, and there was an uptick in the number of firms reporting increased prices for their own goods. The broadest indicator of future activity reflected a trend of increased optimism about growth over the next six months. Indicators Suggest Continued Expansion The diffusion index of current activity, the survey's broadest measure of manufacturing conditions, remained positive for the third consecutive month and increased from 3.6 in November to 10.3 (see Chart). The percentage of firms reporting increases in activity (25 percent) exceeded the percentage reporting decreases (15 percent). The index for current new orders showed a similar improvement, increasing 8 points. The shipments index, at 6.7, was mostly flat. Twice as many firms reported declines in inventories (30 percent) as reported increases (15 percent) and the current inventory index fell 22 points to -14.9. Labor market conditions continue to show overall improvement, but indexes edged down this month. Twenty percent of the firms reported an increase in employment; 10 percent reported a decrease. The current employment index remained positive at 10.7, only 1 point lower than in November. The average workweek index also remained positive but fell nearly 9 points. Prices for Manufactured Goods Edge Higher Increasing costs were more widespread this month compared to last month. The percentage of firms reporting higher input costs increased from 31 percent in November to 41 percent this month. The prices paid diffusion index increased 11 points. The percentage of firms reporting increases in prices for their manufactured goods (22 percent) was higher than that reporting decreases (10 percent). The prices received diffusion index increased 9 points, to its highest reading in seven months. Six-Month Indicators Continue to Improve Indicators for future activity continued to improve this month. The broadest indicator of future activity increased 2 points; it has now increased for four consecutive months and is at its highest reading in nine months (see Chart). The index for future new orders also improved, increasing 8 points. Although employment forecasts remain generally positive, the future employment index fell 13 points. The percentage of firms expecting to increase employment over the next six months (24 percent) is significantly higher than the percentage expecting to decrease employment (11 percent). 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 (7.3 percent). In contrast, other labor costs (wages and non-health-care costs) are expected to rise only 2.1 and 2.5 percent, respectively. All other nonlabor expense categories are expected to increase in 2012: energy (1.8 percent), raw materials (3.3 percent), and intermediate goods (2.4 percent). Firms were also asked how the expected cost increases will compare to 2011 costs. In every category, the percentage of firms indicating that their costs would be higher in 2012 was greater than the percentage reporting that their costs would be lower. Summary According to respondents to the December Business Outlook Survey, the region's manufacturing sector is showing continued improvement at year-end. Indicators for general activity, new orders, shipments, and employment all suggest growth this month. Firms' outlook for future manufacturing growth, as measured by the survey's six-month indicators, continued to improve this month. Special Questions (December 2011) 1. What percentage change in costs do you expect for the following categories in 2012? Energy Other Raw Intermediate Health Nonhealth Materials Goods Wages Benefits Benefits Increase 15% or more 0 1.3 0 0 6.6 0 Increase of 12.5-15% 0 0 0 0 6.6 1.3 Increase of 10-12.5% 2.6 0 1.3 0 10.5 2.6 Increase of 7.5-10% 3.9 9.2 3.9 0 28.9 2.6 Increase of 5-7.5% 7.9 13.2 6.6 2.6 19.7 7.9 Increase of 2.5-5% 21.1 38.2 27.6 40.8 11.8 27.6 Increase of < 2.5% 28.9 18.4 28.9 31.6 3.9 25.0 Stay at current levels 23.7 14.5 26.3 25.0 7.9 32.9 Decline of < 2.5% 5.3 1.3 0 0 1.3 0 Decline of 2.5% or more 5.3 2.6 0 0 1.3 0 Avg. Expected Change 1.8 3.3 2.4 2.1 7.3 2.5 2. How do these expected costs compare with those in 2011? Energy Other Raw Intermediate Health Nonhealth Materials Goods Wages Benefits Benefits Higher 32.9 46.1 30.3 25.0 55.3 23.7 Lower 21.1 15.8 0 7.9 11.8 1.3 Same 42.1 35.5 63.2 65.8 31.6 73.7 * Percentages may not add to 100 percent because some reporters did not respond to the questions. Summary of Returns December 2011 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 3.6 25.0 56.1 14.6 10.3 41.9 47.0 46.4 2.9 44.1 Conditions New Orders 1.3 30.3 46.0 20.6 9.7 39.8 53.8 33.0 6.2 47.6 Shipments 7.3 27.6 49.0 20.9 6.7 37.3 46.6 36.0 9.2 37.4 Unfilled Orders -1.5 18.3 70.0 11.1 7.2 9.0 17.2 60.8 12.8 4.4 Delivery Times 2.5 11.8 79.3 8.8 3.0 -3.7 9.4 72.1 8.2 1.2 Inventories 6.6 14.7 52.0 29.6 -14.9 -11.3 15.3 58.3 22.1 -6.8 Prices Paid 22.8 40.8 52.1 7.1 33.7 40.9 51.2 38.4 0.0 51.2 Prices Received 2.6 21.7 68.7 9.6 12.0 29.7 32.9 55.1 6.9 26.0 Number of Emp. 12.0 20.3 68.7 9.6 10.7 25.4 24.0 60.9 11.1 12.9 Avg. Emp. Wrkwk 11.0 14.9 72.3 12.4 2.5 3.9 19.5 58.8 13.0 6.5 Capital Ex. -- -- -- -- -- 16.1 27.7 46.4 14.6 13.1 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, 2011. November 2011 Responses to the Business Outlook Survey this month suggest that regional manufacturing is expanding, but at a slow pace. The survey's broad indicators for activity, shipments, and new orders recorded positive readings this month, but all declined slightly from their October readings. Employment conditions improved, as indicated by increases in the indexes for employment and average workweek. The broadest indicator of future activity showed marked improvement, and firms were notably more optimistic about future employment. Indicators Suggest Slight Expansion The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, remained positive for the second consecutive month, but it decreased from 8.7 in October to 3.6 (see Chart). Indexes for current new orders and shipments showed a similar pattern, remaining positive but falling 7 points and 6 points, respectively. Firms reported an overall increase in inventories this month; the inventories diffusion index rose from -7.7 to 6.6. Labor market conditions improved according to the firms responding. Twenty-one percent of the firms reported an increase in employment, a slight increase from 18 percent last month. The current employment index increased 11 points from its reading in October, attributable also to a decline in the share of firms reporting employment decreases. The average workweek index increased 8 points, to its highest level in seven months. Prices for Manufactured Goods Are Near Steady, but Costs Are Still Increasing The percentage of firms reporting increases in prices received for their manufactured goods (15 percent) was nearly matched by the percentage reporing decreases (13 percent) this month. The prices received diffusion index increased from a reading of -2.5 last month to 2.6. The majority of firms (69 percent) reported steady prices for their own manufactured products in November. On balance, increasing costs were slightly more widespread this month compared to last month. The prices paid diffusion index increased 3 points but is near its average reading over the past three months. Thirty-one percent of firms reported paying higher prices for inputs this month, and 9 percent reported lower prices. Six-Month Indicators Improve Notably Indicators of future activity strengthened this month. The broadest indicator of future activity increased nearly 15 points and is now at its highest reading in eight months (see Chart). The indexes for future new orders and shipments both improved, increasing 13 points and 10 points, respectively. Paralleling the increase in other future indicators, the index for future employment rose 11 points. The percentage of firms expecting to increase employment over the next six months (37 percent) is the highest percentage in eight months. 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 73 percent in November 2010 to the current rate of near 75 percent. The share of firms expecting to increase their capital spending on plant and equipment (35 percent) was slightly greater than the share planning reductions (33 percent). On balance, this represents deterioration over last year when the same question was asked. As a group, those firms expecting increases in capital spending had a larger average increase in their capacity utilization rate, compared with last year, than firms expecting to cut back or make no change to their spending. Summary According to respondents to the November Business Outlook Survey, the region's manufacturing sector is growing at a slow pace this month. Indicators for general activity, new orders, and shipments suggest growth but at a slightly slower rate than in October, while employment has picked up. Firms registered an improved outlook about future growth overall, with a more favorable forecast for hiring. Special Questions (November 2011) 1. Which of the following best characterizes your plant's capacity utilization rate current and last year's? Capacity Utilization Rate Current Same Time Last Year (% of reporters) (% of reporters) Less than 60% 12.5 12.5 60%-65% 5.6 9.7 65%-70% 9.7 5.6 70%-75% 22.2 29.2 75%-80% 16.7 12.5 80%-85% 8.3 11.1 85%-90% 11.1 11.1 90%-95% 8.3 1.4 95%-100% 1.4 1.4 Average Utilization Rate 74.7 73.1 2. Is your firm increasing or decreasing spending on plant and equipment over the next year? Average Capacity Utilization Rate for Groups 2011 2010 2011 2010 Difference __________________________________________ Increasing 34.7 37.8 80.9 76.5 4.4 Decreasing 33.3 19.5 71.4 71.6 -0.2 No change 25.0 35.4 71.4 70.5 0.9 Average for all surveyed firms 74.7 73.1 1.6 Published U.S. estimate* 75.4** 73.1 2.3 *Source: Federal Reserve Board. **Shown is most recent published data for October 2011. November 2011 Novermber 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 8.7 25.4 52.9 21.7 3.6 27.2 46.1 43.9 4.2 41.9 Conditions New Orders 7.8 21.9 57.5 20.6 1.3 26.7 47.1 41.6 7.3 39.8 Shipments 13.6 31.0 45.4 23.7 7.3 27.1 48.7 37.1 11.4 37.3 Unfilled Orders 3.4 15.1 68.3 16.6 -1.5 7.7 21.9 59.0 12.9 9.0 Delivery Times -0.5 10.3 80.0 7.7 2.5 -1.4 5.5 78.1 9.3 -3.7 Inventories -7.7 21.5 63.7 14.8 6.6 -4.4 18.7 50.5 29.9 -11.3 Prices Paid 20.0 31.4 56.3 8.5 22.8 44.7 47.8 40.9 6.9 40.9 Prices Received -2.5 15.4 69.0 12.8 2.6 25.4 37.5 52.5 7.7 29.7 Number of Emp. 1.4 21.0 70.0 9.0 12.0 14.5 37.1 46.1 11.7 25.4 Avg. Emp. Wrkwk 3.1 22.3 66.0 11.4 11.0 9.7 19.9 56.4 16.0 3.9 Capital Ex. -- -- -- -- -- 12.3 30.2 48.8 14.1 16.1 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 November 15, 2011. October 2011 Responses to the Business Outlook Survey this month suggest that regional manufacturing is showing signs of recovering, following several months of decline. The survey's broad indicators for activity, shipments, and new orders recorded positive readings after two months in negative territory. Responding firms indicated that employment was slightly higher this month. The broadest indicator of future activity remained positive and showed marginal improvement over its reading last month. Indicators Suggest Improvement The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -17.5 in September to 8.7, the first positive reading in three months (see Chart). The current new orders index paralleled the rise in the general activity index, increasing 19 points and returning to positive territory. The shipments index also recorded a positive reading, increasing from -22.8 in September to 13.6 this month. Labor market conditions improved only slightly this month. Nearly 18 percent of the firms reported an increase in employment, but 17 percent reported a decrease. The current employment index remained slightly positive but decreased 4 points from its reading in September. The average workweek index increased notably from -13.7 to 3.1. However, the percentage of firms reporting a longer workweek (15 percent) was only slightly greater than the percentage reporting a shorter one (12 percent). Prices for Manufactured Goods Are Near Steady The percentage of firms reporting decreases in prices for their manufactured goods (15 percent) was slightly higher than the percentage reporting price increases (12 percent) this month. The prices received diffusion index decreased from a reading just above zero last month to -2.5. The majority of firms (69 percent) reported steady prices for their own manufactured products in October. Increasing costs were, on balance, slightly less widespread this month compared to last month. The prices paid diffusion index decreased 3 points. Nearly 31 percent of firms reported paying higher prices for inputs this month, and 11 percent reported lower prices. Six-Month Indicators Improve Indicators for future activity remained positive and strengthened moderately this month. The broadest indicator of future activity improved, increasing 6 points, and is now at its highest reading in six months (see Chart). The indexes for future new orders and shipments also improved modestly, increasing 5 points and 2 points, respectively. The index for future employment paralleled the increase in other future indicators, rising 3 points. The percentage of firms expecting to increase employment over the next six months (25 percent) is higher than the percentage expecting to decrease employment (11 percent). For this month's special questions, manufacturers were asked about changes in their workforce and the changing use of flexible workers over the past year (see Special Questions). The share of firms that increased their total workforce over the past year (46 percent) outnumbered those decreasing their workforce (24 percent), and the mix of employment has changed for many firms. For example, 74 percent of firms indicated that they used temporary or agency workers, and 36 percent of these firms indicated that they have increased the total share of these workers over the past year. Summary According to respondents to the October Business Outlook Survey, the region's manufacturing sector is recovering, following several months of decline. The survey's current indicators suggest an overall increase in the demand for manufactured goods in October, and activity and shipments were reported to be higher. Firms were slightly more optimistic about future growth overall, with all of the survey's future indicators showing improvement over their levels in September. Special Questions (October 2011) 1. Has your total workforce decreased, increased, or stayed the same over the last year? Decreased 24.0% Stayed the same 29.1% Increased 45.6% No response 1.3% Total 100.0% 2. How has your mix (as a share) of total employees changed between the various categories of employees over the last year? Percentage That Use | Percentages (excluding nonresponses) This Type of Labor| | Not Decreased No Increased Total | Used Share Change Share | ----------------------------------------- Regular Full-Time 100.0 | 0.0 20.3 50.6 29.1 100.0 Regular Part-Time 73.0 | 27.0 10.8 51.4 10.8 100.0 Short-Term Workers 47.8 | 52.2 8.7 33.3 5.8 100.0 On-Call Workers 41.8 | 58.2 6.0 34.3 1.5 100.0 Temporary or Agency Workers 74.0 | 26.0 8.2 30.1 35.6 100.0 Independent Contract Workers 54.5 | 45.5 9.1 37.9 7.6 100.0 Summary of Returns October 2011 October vs. September Six Months from now vs. October Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Busines -17.5 30.3 47.6 21.6 8.7 21.4 39.1 44.8 11.8 27.2 Conditions New Orders -11.3 32.0 43.8 24.2 7.8 21.6 41.6 38.2 15.0 26.7 Shipments -22.8 34.6 44.4 21.0 13.6 25.2 40.4 41.8 13.4 27.1 Unfilled Orders -10.4 22.1 56.8 18.6 3.4 4.7 26.2 48.5 18.5 7.7 Delivery Times -7.0 14.4 70.3 15.0 -0.5 -4.8 14.6 64.7 16.0 -1.4 Inventories 10.2 17.7 55.1 25.4 -7.7 -14.1 21.6 42.0 26.0 -4.4 Prices Paid 23.2 30.6 58.1 10.6 20.0 36.3 51.4 35.4 6.7 44.7 Prices Received 0.9 12.2 69.3 14.7 -2.5 18.2 34.3 48.9 8.9 25.4 Number of Emp. 5.8 17.9 64.9 16.5 1.4 11.2 25.2 59.9 10.7 14.5 Avg. Emp. Wrkwk -13.7 15.0 68.7 11.9 3.1 7.4 23.2 62.9 13.5 9.7 Capital Ex. -- -- -- -- -- 5.5 26.7 46.6 14.4 12.3 Notes: (1) Items may not add to 100 percent because of omission by respondents. (2) All data are seasonally adjusted. (3) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (4) Survey data reflect information received through October 18, 2011. September 2011 Responses to the Business Outlook Survey this month suggest that regional manufacturing activity is continuing to contract, but declines are less widespread than in August. The survey's broad indicators for activity, shipments, and new orders all remained negative for the second consecutive month. Responding firms, however, indicated that employment was slightly higher this month. The broadest indicator of future activity remained positive and rebounded this month, suggesting that recent declines are not expected to continue over the next six months. Indicators Suggest Continuing Weakness The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a very low reading of -30.7 in August to -17.5 in September. The index has been negative in three of the last four months (see Chart). The current new orders index paralleled the general activity index, increasing 16 points and remaining negative. The current shipments index fell 9 points. Firms' responses suggest a slight improvement in hiring this month compared with August. The current employment index increased 11 points, after recording its first negative reading in 12 months in August. Over 22 percent of the firms reported an increase in employment, but 16 percent reported a decrease. The percentage of firms reporting a shorter workweek (23 percent) remained greater than the percentage reporting a longer one (9 percent). Prices for Manufactured Goods Are Steady The percentage of firms reporting increases in prices for their own manufactured goods (18 percent) was about the same as the percentage reporting price decreases (17 percent). The prices received index, which was -9.0 in August (its first negative reading in nine months), increased to just above zero this month. The majority of firms (62 percent) reported steady prices for their own products in September. Increasing costs were somewhat more widespread this month compared to last month. Nearly 29 percent of firms reported paying higher prices for inputs this month. Only 6 percent reported lower prices. The prices paid diffusion index increased 10 points, its first one-month increase in seven months. Six-Month Indicators Rebound Indicators for future activity remained positive and strengthened this month. The broadest indicators for future activity improved notably, increasing 20 points and nearly reversing the 22-point decline in August (see Chart). The indexes for future new orders and shipments also improved, increasing 5 points and 13 points, respectively. The index for future employment increased a modest 3 points. The percentage of firms expecting to increase employment over the next six months (25 percent) is higher than the percentage expecting employment to decrease (13 percent). For this month's special questions, firms were asked to estimate their total production growth for the third quarter and ex-pected growth for the upcoming fourth quarter. Firms were evenly divided in their estimates for third quarter growth: The percentage of firms expecting to achieve positive production growth was the same as the percentage expecting declines (41 percent). The average production growth rate for the reporting group was just 0.3 percent. With regard to the upcoming fourth quarter, the percentage of firms expecting a deceleration in the rate of their production growth (49 percent) was greater than the percentage expecting an acceleration in growth (38 percent). Summary According to respondents to the September Business Outlook Survey, the region's manufacturing sector contracted for the second consecutive month. The survey's indicators suggest an overall decline in demand for manufactured goods in September, although the breadth of decreases was not as great as in August. On balance, employment was slightly higher at reporting firms this month. The broadest indicators for future growth improved notably this month, suggesting that firms expect a recovery in activity over the next six months. Responses to special questions, however, suggest that the firms expect further weakening in their rate of production growth during the fourth quarter. Special Questions (September 2011) 1) How will your firm's total production for the third quarter compare with that of the second quarter? % Lower 41.1 No Change 17.8 Higher 41.1 Average increase: 0.3%* 2) For the upcoming fourth quarter, what growth do you expect for production at your plant compared with third quarter? % subtotals Significant deceleration 8.1 Some deceleration 21.6 Slight deceleration 18.9 48.7 No change 10.8 10.8 Slight acceleration 16.2 Some acceleration 17.6 Significant acceleration 4.1 37.8 NR 2.7 2.7 Total 100.0 100.0 *Firms provided estimates within specific numerical ranges. September 2011 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 -30.7 19.0 40.8 36.5 -17.5 1.4 41.5 33.8 20.1 21.4 Conditions New Orders -26.8 25.9 32.6 37.3 -11.3 16.3 43.4 28.5 21.8 21.6 Shipments -13.9 17.0 38.7 39.8 -22.8 12.6 46.1 26.6 20.9 25.2 Unfilled Orders -20.9 10.6 62.8 21.1 -10.4 -3.5 19.4 60.4 14.7 4.7 Delivery Times -18.1 11.3 66.7 18.2 -7.0 -5.1 7.8 73.0 12.6 -4.8 Inventories -9.8 26.4 53.5 16.2 10.2 -26.2 16.5 48.6 30.6 -14.1 Prices Paid 12.8 28.9 58.1 5.7 23.2 34.6 44.2 44.8 7.9 36.3 Prices Received -9 17.5 61.6 16.7 0.9 16.5 27.6 56.5 9.4 18.2 Number of Emp. -5.2 22.1 56.5 16.4 5.8 7.8 24.5 56.5 13.3 11.2 Avg. Emp. Wrkwk -14.4 9.3 59.8 23.0 -13.7 -5.3 21.6 58.2 14.3 7.4 Capital Ex. -- -- -- -- -- 5.2 27.7 44.1 22.2 5.5 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 13, 2011. August 2011 Responses to the Business Outlook Survey this month suggest that regional manufacturing activity has dipped significantly. The survey's broad indicators for activity, shipments, and new orders all declined sharply from last month. Firms indicated that employment and average work hours are lower this month. Price indexes continued to show a trend of moderating price pressures. The broadest indicator of future activity also weakened markedly, but firms still expect overall growth in shipments, new orders, and employment over the next six months. The collection period for this month's survey ran from August 8-16, overlapping a week of unusually high volatility in both domestic and international financial markets. All Indicators Show Declines The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009 (see Chart). The demand for manufactured goods, as measured by the current new orders index, paralleled the decline in the general activity index, falling 27 points. The current shipments index fell 18 points and recorded its first negative reading since September of last year. Suggesting weakening activity, indexes for inventories, unfilled orders, and delivery times were all in negative territory this month. Firms' responses suggest a deterioration in the labor market compared with July. The current employment index fell 14 points, recording its first negative reading in 12 months. About 18 percent of the firms reported an increase in employment, but 23 percent reported a decrease. The percentage of firms reporting a shorter workweek (28 percent) was greater than the percentage reporting a longer one (14 percent). The workweek index fell 9 points. Price Indexes Show Further Moderation Diffusion indexes for prices paid and prices received were lower this month and suggest a continued trend of moderating price pressures. The prices paid index declined 12 points and has now declined 36 points over the last three months. More firms reported declines in prices received for their products this month (19 percent) than reported increases (10 percent). The prices received index decreased 10 points, resulting in the first negative reading since last November. Six-Month Indicators Dip But Remain Positive The survey's indicators for future activity fell 22 points this month, more than reversing the increase of 21 points in July (see Chart). The indexes for future new orders and shipments also fell 12 and 10 points, respectively. The index for future employment decreased more modestly, by 2 points, and remains well below average readings in the first quarter of this year. More firms expect to increase employment over the next six months (32 percent) than expect to decrease it (24 percent). In special questions this month, firms were asked about the importance of seasonal factors on production (see Special Questions). Almost 40 percent of firms indicated that seasonal factors have a significant influence on monthly production levels. Nearly 29 percent of the firms had scheduled shutdowns or slowdowns during the summer months this year. But, on balance, production levels were not particularly unusual this year: The number of firms indicating that production decreases were greater than usual during July and August was only slightly higher than the number indicating that production decreases were less than usual. Summary According to respondents to the August Business Outlook Survey, the region's manufacturing sector is much weaker this month. The survey's indicators suggest a decline in demand for manufactured goods, and shipments and employment were also in decline. Price measures suggest continued moderation in price pressures, and more firms reported price declines for their manufactured goods this month. The broadest indicators for growth over the next six months, including employment, fell back notably this month but remain slightly favorable to expansion. Released: August 18, 2011, 10 a.m. ET. The September Business Outlook Survey will be released on September 15, 2011, at 10 a.m. ET Special Questions (August 2011) 1) How important are seasonal factors in your monthly production levels? Significant 39.5 Not Significant 59.2 NR 1.3 2) Have seasonal factors become more or less important for your business over time? More important 13.2 Less important 15.8 No difference over time 60.5 NR 10.5 3) Will you schedule plant shutdowns or production slowdowns during the summer months this year? Yes 29.0 No 60.5 NR 10.5 If yes, which of the following best characterizes your expected shutdowns/slowdowns for this month and next? July August Production decreases greater than usual 6.6 6.6 Production decreases about the same as usual 17.1 5.3 Production decreases less than usual 5.3 5.3 Not applicable 71.0 82.8 Summary of Returns August 2011 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 3.2 14.7 39.2 45.4 -30.7 23.7 32.6 31.3 31.1 1.4 Conditions New Orders 0.1 20.2 32.8 47.0 -26.8 27.8 40.5 30.3 24.2 16.3 Shipments 4.3 22.7 39.5 36.6 -13.9 23.0 39.0 29.8 26.4 12.6 Unfilled Orders -16.3 16.7 45.1 37.6 -20.9 2.9 20.8 52.8 24.3 -3.5 Delivery Times 6.4 8.8 64.4 26.9 -18.1 3.4 12.7 66.3 17.8 -5.1 Inventories 1.4 23.6 43.1 33.3 -9.8 5.0 15.0 41.4 41.2 -26.2 Prices Paid 25.1 26.1 59.4 13.3 12.8 38.7 42.6 48.7 8.0 34.6 Prices Received 1.1 10.1 69.9 19.1 -9.0 8.3 30.1 54.6 13.6 16.5 Number of Emp. 8.9 18.1 54.8 23.3 -5.2 10.1 31.8 42.6 24.0 7.8 Avg. Emp. Wrkwk -5.4 13.9 57.7 28.4 -14.4 4.1 17.1 57.5 22.4 -5.3 Capital Ex. -- -- -- -- -- 18.1 26.7 39.1 21.5 5.2 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 August 16, 2011. July 2011 Responses to the Business Outlook Survey suggest that regional manufacturing activity remained weak in July. The survey's indicators for activity and new orders, which had turned negative last month, recovered somewhat but are at very low positive readings. Firms indicated that employment grew modestly while the average workweek lessened. Indexes for prices show a continuing trend of moderating price pressures. The broadest indicator of future activity improved markedly this month, rebounding from its lowest reading in 31 months in June. Indicators Suggest Activity Is Near Steady The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased to 3.2 from -7.7 (see Chart). The demand for manufactured goods, as measured by the current new orders index, improved from last month but suggests flat demand: The index rose 8 points to a reading of zero, and the percentage of firms reporting increases was equally matched by the percentage reporting decreases (28 percent). The current shipments index remained slightly positive but virtually unchanged from June. Firms' responses suggest a slight improvement in the labor market compared to June. The current employment index increased 5 points and remained positive for the 11th consecutive month. About 22 percent of the firms reported an increase in employment, up slightly from 14 percent last month. Slightly more firms reported a shorter workweek (21 percent) than re-ported a longer one (15 percent) and the workweek index was down 7 points. Price Pressures Show Further Moderation Diffusion indexes for prices paid and prices received were lower this month and suggest a continued trend of moderating price pressures. The prices paid index declined 2 points, following a sharp drop of 22 points last month. Still, one-third of the firms reported higher prices for inputs this month, and 8 percent reported a decline. Only slightly more firms reported a rise in prices for manufactured goods (18 percent) than reported declines (17 percent). The prices received index decreased 3 points, its third consecutive monthly decline. Six-Month Indicators Rebound The survey's indicators for future activity showed notable improvement this month. The future general activity index increased 21 points but still remained well below average readings in the first quarter (see Chart). The indexes for future new orders and shipments also increased, 20 and 16 points, respectively. The index for future employment increased more moderately, by 5 points, and also remains well below average readings in the first quarter. More firms expect to increase employment over the next six months (30 percent) than expect to decrease employment (20 percent). In special questions this month, firms were asked about recent trends in demand for their manufactured goods and to characterize the reasons for any slowing. Slightly over half of the firms indicated that demand had increased recently, while 26 percent indicated that demand had slowed. Of those firms that experienced some slowing, the most frequently cited reasons were increased uncertainty and higher prices for energy, commodities, and transportation. Firms were also asked about their forecast for production in the third quarter compared to the second quarter. The median forecast called for a meager 0.5 percent increase in production, with a large share of firms situated at either end of the range of growth rates. Over 21 percent of the firms expected increases of greater than 4 percent and 18 percent expected decreases of more than 4 percent. Summary According to respondents to the July Business Outlook Survey, the region's manufacturing sector remained weak in July. The survey's indicators suggested flat demand for manufactured goods this month, while shipments and employment grew only slightly. Price measures suggested continued moderation in price pressures. The broadest indicators for future activity rebounded after falling sharply last month and firms are somewhat more optimistic about their hiring plans over the next six months. Special Questions (July 2011) 1. Over the past two months, how would you characterize the demand for your manufactured products? % subtotals Increased significantly 9.4% Increased moderately 41.2% 50.6% No change 20.0% Decreased moderately 21.2% 25.9% Decreased significantly 4.7% 2. If you have experienced a recent slowing in growth in demand, to which factors do you attribute this? Increased economic uncertainty 82.4% Higher prices for energy, commodities, & transportation 44.1% Seasonal factors 35.3% The ending of fiscal stimulus spending 11.8% 3. What percentage change in your firm's production do you anticipate in the third quarter of 2011 over the second quarter? Increase of more than 4% 21.2% Increase of 3-4% 2.4% Increase of 2-3% 5.9% Increase of 1-2% 15.3% Increase of less than 1% 4.7% 49.5% No change 10.6% Decline of less than 1% 2.3% Decline of 1-2% 7.1% Decline of 4% or more 17.7% 37.7% Median increase: 0.5% *Percentages add to more than 100% due to respondents choosing more than one factor. Summary of Returns July 2011 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 -7.7 27.5 46.8 24.3 3.2 2.5 42.3 33.3 18.6 23.7 Conditions New Orders -7.6 27.7 44.0 27.7 0.1 7.9 48.0 28.0 20.3 27.8 Shipments 4.0 22.8 56.6 18.5 4.3 6.6 42.7 33.9 19.8 23.0 Unfilled Orders -16.3 8.8 63.4 25.1 -16.3 -9.6 22.9 56.2 20.0 2.9 Delivery Times -20.5 12.5 80.2 6.2 6.4 -11.4 15.5 66.0 12.1 3.4 Inventories -8.5 27.9 45.2 26.5 1.4 -16.8 24.9 51.6 19.9 5.0 Prices Paid 26.8 32.6 59.9 7.5 25.1 27.5 44.6 43.4 5.9 38.7 Prices Received 4.4 17.7 65.1 16.6 1.1 2.5 22.5 61.4 14.2 8.3 Number of Emp. 4.1 22.2 64.5 13.3 8.9 5.5 29.6 46.9 19.5 10.1 Avg. Emp. Wrkwk 1.9 15.4 61.6 20.9 -5.4 -1.6 15.5 68.9 11.3 4.1 Capital Ex. -- -- -- -- -- 12.9 34.1 43.4 16.0 18.1 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 July 19, 2011. June 2011 Responses to the Business Outlook Survey suggest that regional manufacturing activity weakened in June. The survey's indicators for activity and new orders turned negative this month, while indicators for shipments and employment fell but remained slightly positive. Indicators for prices show a continuing trend of moderating price pressures. The broadest indicator of future activity fell sharply in June, recording its lowest reading in 31 months. Indicators Suggest Weakening Business The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 3.9 in May to -7.7, its first negative reading since last September (see Chart). The demand for manufactured goods, as measured by the current new orders index, showed a similar decline: The index fell 13 points and recorded its first negative reading since last October. The current shipments index fell just 3 points but remained slightly positive. Firms reported declines in inventories and unfilled orders, and shorter delivery times. Firms' responses suggested little overall improvement in the labor market this month. The current employment index remained positive for the ninth consecutive month, but only 14 percent of the firms reported an increase in employment, while 10 percent reported a decline. Only slightly more firms reported a longer workweek (14 percent) than reported a shorter one (12 percent) and the workweek index was down only slightly from May. Price Pressures Show Moderation Indexes for prices paid and prices received declined from May and continue a trend of moderating price pressures in recent months. The prices paid index declined sharply, by 22 points this month. Still, 37 percent of the firms reported higher prices for inputs this month, and 10 percent reported a decline. On balance, firms reported a slight rise in prices for manufactured goods: 17 percent reported higher prices for their own goods this month; 12 percent reported price reductions. The prices received index decreased 12 points, its second consecutive monthly decline. Six-Month Indicators Fall Sharply Again The future general activity index decreased 14 points this month and has now dropped 61 points over the last three months (see Chart). The indexes for future new orders and shipments also declined, decreasing 9 and 14 points, respectively. The index for future employment fell 17 points and has declined 32 points in the last two months. Still, slightly more firms expect to increase employment over the next six months (21 percent) than expect to decrease employment (16 percent). In special questions this month, firms were asked about recent cost increases for energy and raw materials and the nature of their pricing since the beginning of the year. Forty-seven percent of the firms indicated they had increased base prices since the beginning of the year, although 54 percent said they have been unable to pass on cost increases. Moreover, 19 percent have instituted surcharges, and 14 percent have price escalation clauses covering cost increases. Respondents also indicated that a large percentage of their suppliers have instituted surcharges covering recent cost increases: 71 percent of the firms reported surcharges for transportation, 36 percent for commodities, and 36 percent for energy. Thirty-four percent of the firms indicated that surcharges and/or escalation clauses have always been an important element of their own pricing. Summary According to respondents to the June Business Outlook Survey, the region's manufacturing sector weakened this month. The survey's broad indicators for general activity and new orders suggested slight declines, while indicators for shipments and employment suggested only slight growth. Fewer firms cited input price pressures this month, and fewer firms reported higher prices for their own manufactured goods. The broadest indicators for future activity continued to decline and are now at their lowest reading in over two years. Special Questions (June 2011) 1. Since the beginning of the year, how have you passed on cost increases (for energy and other raw materials) to your customers? We have been unable to pass on cost increases to our customers 53.9% We have increased our base prices 47.2% We have instituted price surcharges 19.1% We have existing contracts which include price escalation clauses covering increased costs 13.5% NA 0.0% 2. Have any of your suppliers instituted surcharges and for what costs? (check all that apply) Transportation 70.8% Commodities 36.0% Energy 36.0% Other 6.7% NA 15.7% 3. Looking forward, how would you characterize surcharges and/or escalation clauses relative to your traditional pricing structure? It is unlikely that we will ever institute surcharges or cost escalation clauses 38.2% These have always been an important element of pricing 33.7% Surcharges will be more likely to be used in the future 23.6% Escalation clauses incorporating cost adjustments will be more likely to be used in the future 16.9% We are considering instituting surcharges for the first time 3.4% NA 5.6% *Percentages may add to more than 100% due to respondents having more than one answer for the same question Summary of Returns June 2011 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 3.9 24.1 44.1 31.8 -7.7 16.6 31.7 35.5 29.2 2.5 Conditions New Orders 5.4 22.4 45.0 29.9 -7.6 16.8 36.4 32.5 28.5 7.9 Shipments 6.5 31.5 41.0 27.5 4.0 20.4 35.1 32.2 28.5 6.6 Unfilled Orders -7.8 11.2 59.3 27.5 -16.3 -1.0 13.6 53.9 23.1 -9.6 Delivery Times -2.3 6.6 63.6 27.1 -20.5 -3.7 10.9 60.8 22.2 -11.4 Inventories -5.4 12.9 60.1 21.5 -8.5 5.2 17.5 42.3 34.3 -16.8 Prices Paid 48.3 36.6 49.6 9.8 26.8 52.4 40.4 40.0 12.9 27.5 Prices Received 16.8 16.8 66.5 12.4 4.4 27.3 19.3 56.0 16.7 2.5 Number of Emp. 22.1 14.0 70.0 9.9 4.1 22.3 21.4 51.5 15.9 5.5 Avg. Emp. Wrkwk 3.9 13.8 70.2 11.9 1.9 9.8 20.1 50.1 21.7 -1.6 Capital Ex. -- -- -- -- -- 23.1 24.7 56.1 11.7 12.9 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 data reflect information received through June 14, 2011. May 2011 Responses to the Business Outlook Survey suggest that regional manufacturing activity grew slightly in May. Nearly all of the survey's broadest indicators remained positive but fell from their readings in the previous month. The current employment index, however, showed resilience and improved this month. Indicators for prices fell back somewhat from their relatively high readings of recent months but still suggest considerable price pressure. The survey's indicators of future activity fell sharply this month, reflecting consensus about future growth. Indicators Suggest Growth Has Slowed The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 18.5 in April to 3.9, its lowest reading since last October (see Chart). The demand for manufactured goods, as measured by the current new orders index, showed a similar slowing: The index fell 13 points while the shipments index declined 23 points; both remained positive, however, suggesting slight growth last month. For the first time in eight months, firms reported that unfilled orders and delivery times were falling—both indexes were slightly negative this month. Firms' responses continue to indicate overall improvement in the labor market despite weaker activity, orders, and ship-ments. The current employment index increased nearly 10 points and has now remained positive for eight consecutive months. The percentage of firms reporting an increase in employment (32 percent) is higher than the percentage reporting a decline (10 percent). Only slightly more firms reported a longer workweek (17 percent) than reported a shorter one (13 percent) and the workweek index decreased 14 points. Price Pressures Moderate Slightly Indexes for prices paid and prices received declined from April but remain at relatively high readings, suggesting that considerable price pressures remain. The prices paid index declined 9 points this month, but it is still at a relatively high reading of 48.3. Fifty-six percent of the firms reported higher prices for inputs this month, and 8 percent reported a decline. On balance, firms also reported a rise in prices for manufactured goods: 20 percent reported higher prices for their own goods this month; just 3 percent reported price reductions. The prices received index decreased nearly 11 points, its first decline in nine months. Six-Month Indicators Fall Sharply The future general activity index decreased 17 points this month, following a 29-point decline last month (see Chart). The indexes for future new orders and shipments also declined, decreasing 12 and 17 points, respectively. The index for future employment, which had been improving in recent months, fell back 15 points. Still, more firms expect to increase employment over the next six months (29 percent) than expect to decrease employment (7 percent). In special questions this month, firms were asked about the factors that are influencing their hiring plans (see Special Questions). Among the 48 percent of firms that are planning to increase employment over the next year, the most frequently cited reason influencing this decision was the expectation of high sales growth. The second and third most cited reasons were that current staff is overworked and the need to obtain skills not possessed by current staff. The most frequently cited factor for restraining hiring among all the firms was the need to keep costs low and low expectations of sales growth. Uncertainty about health-care costs, regulations, and government policies was also prominently listed. Summary According to respondents to the May Business Outlook Survey, the region's manufacturing sector grew, but at a slower pace this month. Most of the survey's broad indicators fell but continued to signal overall expansion. A majority of firms continued to cite input price pressures and a sizable share of firms reported higher prices for their own manufactured goods again this month. Indicators for future activity fell back sharply this month but continued to suggest that firms expect the current expansion in manufacturing to continue over the next six months. Summary of Returns May 2011 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 18.5 25.0 52.2 21.1 3.9 33.6 35.8 41.7 19.2 16.6 Conditions New Orders 18.8 28.4 48.7 23.0 5.4 29.2 36.6 41.4 19.9 16.8 Shipments 29.1 29.8 46.8 23.3 6.5 37.8 40.5 34.7 20.0 20.4 Unfilled Orders 12.9 14.1 64.1 21.8 -7.8 14.1 13.2 65.3 14.2 -1.0 Delivery Times 11.2 12.3 73.1 14.6 -2.3 -1.1 13.2 69.5 16.8 -3.7 Inventories 1.7 21.1 50.7 26.5 -5.4 10.0 20.8 62.3 15.7 5.2 Prices Paid 57.1 56.3 35.6 8.0 48.3 57.0 59.1 33.1 6.7 52.4 Prices Received 27.5 19.7 76.2 2.9 16.8 37.5 34.9 53.2 7.6 27.3 Number of Emp. 12.3 32.2 57.6 10.2 22.1 37.7 28.9 62.6 6.6 22.3 Avg. Emp. Wrkwk 17.7 16.9 69.5 12.9 3.9 18.4 20.1 65.7 10.3 9.8 Capital Ex. -- -- -- -- -- 20.0 33.2 50.8 10.1 23.1 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 May 17, 2011. April 2011 Results from the Business Outlook Survey suggest that regional manufacturing activity continued to grow in April but at a slower pace than in March. Nearly all of the survey's broadest indicators remained positive but fell from their readings in the previous month. Increases in input prices continue to be widespread, and a significant percentage of firms reported increases in prices for their own manufactured goods. The survey's indicators of future activity fell notably this month; however, most firms expect continued growth over the next six months. Indicators Suggest Slower Growth The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 43.4 in March to 18.5 this month (see Chart). The demand for manufactured goods, as measured by the current new orders index, showed a similar slowing: The index fell 22 points, following seven consecutive months of increase. The shipments index declined 6 points and remained at a relatively high level. Firms continued to report that unfilled orders and delivery times were still rising. Firms' responses continue to indicate overall improvement in labor markets. The current employment index fell 6 points but has remained positive for eight consecutive months. The percentage of firms reporting an increase in employment (20 percent) is higher than the percentage reporting a decline (8 percent). Over twice as many firms reported a longer workweek (32 percent) than reported a shorter one (14 percent) and the workweek index increased 5 points. Firms Report Higher Output Prices Firms continue to report price increases for inputs as well as their own manufactured goods. The prices paid index declined 7 points this month but remains about 45 points higher than readings just seven months ago. Fifty-nine percent of the firms reported higher prices for inputs this month, compared to 64 percent last month. On balance, firms also reported an increase in prices for their own manufactured goods: The prices received index increased 5 points and has steadily increased over the last eight months. Thirty percent of firms reported higher prices for their own goods this month; just 3 percent reported price reductions. Six-Month Indicators Fall The future general activity index decreased 29 points this month, its lowest reading since last September (see Chart). The indexes for future new orders and shipments also declined, decreasing 31 and 22 points, respectively. The index for future employment continued to be a bright spot and still reflects optimism about expected expansion in the manufacturing sector. The future employment index increased 7 points. More firms expect to increase employment over the next six months (45 percent) than expect to decrease employment (7 percent). In special questions this month, firms were asked about their export business and expectations for growth for the remainder of the year (see Special Questions). The average firm in the survey's reporting group exports approximately 12 percent of its output. Among the firms that export, about 40 percent expect the share of products for export to increase. Firms were also asked about any adverse effects of the recent crisis in Japan or other international events on the availability of raw materials or other products. The largest percentage of firms (80 percent) indicated no effect; 10 percent indicated some current adverse effects; and 10 percent cited possible future effects. Summary According to respondents to the April Business Outlook Survey, the region's manufacturing sector continued to expand this month but at a slower pace than over the previous several months. Most of the survey's broad indicators fell this month but continued to signal expansion. A majority of firms continue to cite price pressures, and a significant share of firms reported higher prices for their own manufactured goods again this month. Indicators for future activity fell notably this month but still suggest that firms expect the current expansion in manufacturing to continue over the next six months. Special Questions (April 2011) 1. Approximately what percentage of your manufacturing output is for export? Mean: 11.7%* Median: 5.0% Number of Respondents: 89.0 2. Over the remainder of this year, do you expect the share of products you export to: ** Increase Substantially 1.4% Increase Moderately 38.4% Stay the Same 56.1% Decrease Moderately 2.7% Decrease Substantially 1.4% 3. Have recent developments in Japan or other international events had any adverse effects on the availability of raw materials or other intermediate products for you or any of your customers? None 80% Some Current Effects 10% Possible Future Effects 10% * About 34 percent of all reporting firms indicated they do not export. **Responses include only those firms that export. Summary of Returns April 2011 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 43.4 36.0 43.5 17.5 18.5 63.0 46.3 36.6 12.7 33.6 Conditions New Orders 40.3 37.4 43.0 18.5 18.8 60.1 45.6 31.9 16.4 29.2 Shipments 34.9 42.0 44.8 12.9 29.1 59.3 51.0 31.4 13.2 37.8 Unfilled Orders 14.9 27.7 55.9 14.7 12.9 18.5 27.0 54.3 12.8 14.1 Delivery Times 8.5 20.3 69.9 9.0 11.2 10.4 12.5 70.0 13.6 -1.1 Inventories 12.0 24.5 52.4 22.7 1.7 14.0 31.1 42.7 21.1 10.0 Prices Paid 63.8 58.5 40.0 1.4 57.1 67.2 60.4 31.3 3.3 57.0 Prices Received 22.6 30.2 67.0 2.7 27.5 38.1 42.6 45.3 5.1 37.5 Number of Emp. 18.2 20.2 66.0 7.9 12.3 30.7 44.7 38.8 7.0 37.7 Avg. Emp. Wrkwk 13.2 31.7 51.2 14.0 17.7 17.0 25.2 60.8 6.8 18.4 Capital Ex. -- -- -- -- -- 34.5 30.2 51.5 10.2 20.0 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 April 19, 2011. March 2011 Results from the Business Outlook Survey suggest that regional manufacturing activity continued to show improvement in March. The survey's broadest indicators either improved from their readings in February or remained at relatively high levels. Increases in input prices continue to be widespread, and more firms have been reporting increases in prices for their manufactured goods in recent months. The survey's broad indicators of future activity also showed notable improvement this month. Most firms also indicated that they expect acceleration in production over the next quarter. Indicators Suggest Growth Picked Up The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 35.9 in February to 43.4 this month (see Chart). This is the highest reading since January 1984. The demand for manufactured goods is showing continued strength: The new orders index increased 17 points this month, the sixth consecutive monthly increase. The shipments index was little changed this month and remains at a high level. Firms also reported that unfilled orders and delivery times rose again this month. Twice as many firms reported increases in inventories this month (24 percent) than reported decreases (12 percent). And the current inventory index has now been positive for three consecutive months and is at its highest reading in four years. Firms' responses continue to indicate overall improved labor market conditions. The current employment index fell back 5 points, but for the seventh consecutive month, the percentage of firms reporting an increase in employment (25 percent) is higher than the percentage reporting a decline (7 percent). Over twice as many firms reported a longer workweek (25 percent) than reported a shorter one (12 percent). Firms Continue to Report Higher Prices Firms continue to report price increases for inputs as well as their own manufactured goods. The prices paid index declined 3 points this month but has still increased 51 points over the past six months. Sixty-four percent of the firms reported higher prices for inputs this month. On balance, firms also reported a rise in prices for manufactured goods: The prices received index increased 2 points and has steadily increased in recent months. Thirty-two percent of firms reported higher prices of their own goods this month, compared with 29 percent in February. Manufacturing Outlook Improves The future general activity index increased 16 points, to a reading of 63.0, its highest reading since February 1993 (see Chart). The indexes for future new orders and shipments also improved, increasing 18 and 8 points, respectively. Continuing to reflect optimism about employment expansion in the manufacturing sector, the future employment index increased 6 points. More firms expect to increase employment over the next six months (33 percent) than expect to decrease employment (2 percent). In special questions this month, firms were asked about their expectations for production growth for the upcoming second quarter (see Special Questions). Over 75 percent of the firms expect increases in production in the second quarter; 10 percent expect decreases. This is in contrast to the situation in March of last year, when 57 percent of the firms were expecting growth and 17 percent were expecting declines in production. Sixty-six percent of the firms said second quarter production growth would represent an acceleration in growth (16 percent characterized it as “significant acceleration”; 49 percent said the expected growth represented “some acceleration”). Summary According to respondents to the March Business Outlook Survey, the region's manufacturing sector continued to expand this month. The survey's broad indicators remain at high levels, and responses suggest a notable improvement in new orders this month. Increases in input prices continue to be reported, and more firms have been reporting higher prices for their own manufactured goods in recent months. Firms' outlook for the next six months also showed a notable improvement this month. Special Questions (March 2011) 1. What change, if any, do you anticipate in your firm's production during the second quarter of 2011 compared to the first quarter? 2011 2010 Decrease of more than 5% 6.5% Decrease of 3-5% 2.6% Decrease of less than 3% 1.3% Total decrease 10.4% 17.4% No change 14.3% Increase of less than 3% 24.6% Increase of 3-5% 13.0% Increase of more than 5% 36.4% Total increase 75.3% 56.5% 2011: Average 2.7%, Median: 3.5% 2010: Average 1.8%, Median: 1.5% -------------------------------------------------------------------------------- 2. Would this represent an acceleration or deceleration of growth from the first quarter of 2011? Significant deceleration 3.8% Deceleration: Some deceleration 6.3% 10.1% No change 19.0% Some acceleration 49.3% Acceleration 65.8% Significant acceleration 16.4% -------------------------------------------------------------------------------- 3. Does the expected increase or decrease reflect seasonal factors or a change in business conditions? Seasonal 24.1% Change in Business Conditions 50.6% Other 8.9% Percentages may not add to 100 percent because not all firms answered all questions. Summary of Returns March 2011 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 Business 35.9 54.6 32.3 11.2 43.4 46.8 66.2 27.7 3.2 63.0 Conditions New Orders 23.7 54.5 30.7 14.2 40.3 42.1 64.2 27.0 4.2 60.1 Shipments 35.2 51.0 33.0 16.0 34.9 51.2 63.8 29.6 4.5 59.3 Unfilled Orders 14.9 25.6 63.0 10.7 14.9 22.2 26.8 61.7 8.3 18.5 Delivery Times 10.0 15.4 77.5 6.9 8.5 4.7 15.1 77.3 4.7 10.4 Inventories 2.1 24.4 63.1 12.4 12.0 9.4 30.0 48.6 16.0 14.0 Prices Paid 67.2 63.8 36.2 0.0 63.8 73.1 68.4 28.9 1.2 67.2 Prices Received 21.0 31.5 59.7 8.8 22.6 40.1 43.7 48.4 5.6 38.1 Number of Emp. 23.6 25.4 67.4 7.2 18.2 24.4 32.6 59.2 1.9 30.7 Avg. Emp. Wrkwk 12.8 24.8 63.6 11.6 13.2 13.9 25.3 63.0 8.3 17.0 Capital Ex. -- -- -- -- -- 16.2 37.0 57.7 2.4 34.5 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 14, 2011. February 2011 According to respondents to the February Business Outlook Survey, growth in the region's manufacturing sector picked up this month. Most of the broad indicators showed an improvement over their readings in January, and employment among reporting firms increased. Increases in input prices continued to be widespread this month, and slightly more firms reported increases in prices for their own manufactured goods. The survey's broad indicators of future activity suggest that firms expect a continued expansion in activity over the next six months. Indicators All Point to Growth The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 19.3 in January to 35.9 this month. This is the highest reading since January 2004 (see Chart). The demand for manufactured goods is showing continued strength: Although the new orders index was virtually unchanged in February, it has increased over the past six months. The shipments index also improved markedly, increasing 22 points. Firms also reported a rise in unfilled orders and longer delivery times this month. Firms' responses continue to indicate improving labor market conditions. The current employment index increased 6 points, and for the sixth consecutive month, the percentage of firms reporting an increase in employment (29 percent) is higher than the percentage reporting a decline (5 percent). More than twice as many firms reported a longer workweek (23 percent) than reported a shorter one (10 percent). Firms Report Higher Prices Price increases for inputs as well as firms' own manufactured goods were more widespread again this month. Sixty-seven percent of the firms reported higher prices for inputs, compared with 54 percent in the previous month. The prices paid index, which increased 13 points in February, has now increased 55 points over the past five months. On balance, firms also reported a rise in prices for their own manufactured goods. The prices received index increased 4 points and has steadily increased over the past four months. Twenty-nine percent of firms reported higher prices for their own goods this month, compared to 26 percent in January. Firms Expect Growth to Continue The future general activity index remained positive for the 27th consecutive month but fell back 3 points, from 49.8 in January to 46.8 (see Chart). The indexes for future new orders and shipments remained at relatively high levels. The future shipments index increased 9 points, but the future new orders index fell 1 point. The future employment index decreased 7 points but continues to reflect optimism about employment growth overall. More firms expect to increase employment over the next six months (32 percent) than expect to decrease employment (8 percent). In this month's special questions, firms were asked about pricing of their products since the beginning of the year and their expectations for price changes in the near future (see Special Questions). Since the beginning of the year, 57 percent of the res-ponding firms indicated some increase in prices for their own goods, with the most frequently cited range of increase between 3 and 4 percent. Fifty-nine percent indicated that they expect increases over the next three months, with the most frequently cited range also between 3 and 4 percent. Nearly 29 percent of firms reported currently experiencing shortages or delayed delivery of critical raw or intermediate products, with the most commonly cited products being steel or steel-related and other metals. Summary According to respondents to the February Business Outlook Survey, the region's manufacturing sector is gaining strength. All of the broad indicators showed improvement, with new orders continuing to expand. Firms also reported a pickup in hiring with a higher percentage of firms expanding payrolls. Increases in input prices continue to be reported, and more firms have been reporting higher prices for their own manufactured goods. Firms remain confident that an expansion of manufacturing activity will continue over the next six months. SPECIAL QUESTIONS (February 2011) 1.Many firms have been reporting cost increases since the beginning of the year. What impact are these recent increases having, or expected to have, on the prices of your finished products over the next three months? -------------------------------------------------------------------------------- a.Since the beginning of the year, we have already increased our prices by: Sub Total 0 38.2% 38.2% 1-2% 19.7% 3-4% 21.1% 5-6% 9.2% 7-8% 2.6% 9-10% 2.6% greater than 10% 1.3% 56.5% -------------------------------------------------------------------------------- b.Over the next three months we expect price increases of approximately: Sub Total We expect steady prices for our goods 34.2% 34.2% 1-2% 14.5% 3-4% 30.3% 5-6% 7.9% 7-8% 3.9% 9-10% 0.0% greater than 10% 2.6% 59.2% We expect price decreases for our goods 1.3% 1.3% -------------------------------------------------------------------------------- 2.Are you currently experiencing shortages or delayed delivery of any critical raw or intermediate products? yes 28.9% no 67.1% no response 3.9% -------------------------------------------------------------------------------- * The most commonly cited products were steel and steel-related products and other metals Percentages may not add to 100 percent because not all firms answered all questions. Summary of Returns February 2011 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 19.3 45.5 41.6 9.6 35.9 49.8 55.8 30.9 9.0 46.8 Conditions New Orders 23.6 42.4 36.3 18.7 23.7 43.3 48.8 37.7 6.7 42.1 Shipments 13.4 44.3 46.5 9.1 35.2 42.7 56.7 29.4 5.5 51.2 Unfilled Orders 8.7 23.5 66.4 8.5 14.9 11.8 29.4 55.9 7.2 22.2 Delivery Times 2.3 13.0 80.6 3.0 10.0 13.5 12.4 72.2 7.8 4.7 Inventories 6.8 24.8 51.1 22.7 2.1 13.9 25.1 51.3 15.7 9.4 Prices Paid 54.3 67.2 32.8 0.0 67.2 66.4 74.7 15.2 1.6 73.1 Prices Received 17.1 28.5 60.7 7.6 21.0 38.2 45.0 43.7 4.9 40.1 Number of Emp. 17.6 29.0 64.5 5.4 23.6 31.0 32.4 54.6 8.0 24.4 Avg. Emp. Wrkwk 10.6 23.3 62.1 10.4 12.8 22.9 24.2 53.1 10.3 13.9 Capital Ex. -- -- -- -- -- 29.0 24.4 61.7 8.2 16.2 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 February 14, 2011. January 2011 Results from the Business Outlook Survey suggest that regional manufacturing activity continues to expand in January. All of the broad indicators remained positive this month and there was an apparent pickup in new orders and employment. Increases in input prices continue to be widespread this month, and more firms reported increases in prices for their manufactured goods. The survey's broad indicators of future activity suggest that firms expect a continued expansion in activity over the next six months. Indicators All Point to Growth The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, edged down slightly from a revised reading of 20.8 in December to 19.3 in January.* The index has been positive for four consecutive months, following a two-month dip into negative territory (see Chart). The demand for manufactured goods is showing continued improvement this month: The new orders index increased 13 points this month, the fourth consecutive monthly increase. The shipments index also improved, increasing 8 points. Firms' responses continue to suggest that labor market conditions are improving.The current employment index increased 13 points, and for the fifth consecutive month, the percentage of firms reporting an increase in employment (25 percent) is higher than the percentage reporting a decline (7 percent). Twice as many firms reported a longer workweek (22 percent) than reported a shorter one (11 percent). Higher Prices Are Reported Price increases for inputs as well as firms' own manufactured goods are more widespread this month. Fifty-four percent of the firms reported higher prices for inputs, compared with 52 percent in the previous month. The prices paid index, which increased 6 points in January, has increased 42 points over the past four months. On balance, firms also reported a rise in prices for manufactured goods: More firms reported increases in prices (26 percent) than reported decreases (9 percent), and the prices received index increased 8 points, its second consecutive positive reading. Firms Expect Growth to Continue The future general activity index remained positive for the 26th consecutive month but fell back 5 points, from a revised reading of 55.4 to 49.8 (see Chart). The indexes for future new orders and shipments remained at relatively high levels but also declined, falling 7 and 3 points, respectively. The future employment index decreased 1 point, remaining near its highest reading in eight months. More firms expect to increase employment over the next six months (38 percent) than expect to decrease employment (7 percent). In this month's special questions, firms were asked about the factors that are influencing their hiring plans (see Special Questions). Among firms that are planning to increase employment over the next six to 12 months, the most frequently cited reason influencing this decision was the expectation of high sales growth. The most frequently cited factor among those firms restraining hiring was low expectations for sales growth. Uncertainty about regulations and government policies was the second most important factor cited, followed by high labor costs. Summary According to respondents to the January Business Outlook Survey, the region's manufacturing sector continued to expand this month. All of the broad indicators remained positive, with more firms reporting increases in new orders. Firms also reported a pickup in hiring. Increases in input prices continue to be reported, and some price increases for manufactured goods are also in evidence. Firms remain quite confident that an expansion of manufacturing activity will continue through the first half of the year. * The survey's annual historical revisions, which incorporate new seasonal adjustment factors, were released on January 13, 2011. Revisions for selected series from 2006 to 2010 are listed on pages 3-4 of this release. The full set of revised historical data is available at: http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlo ok-survey/historical-data/revisions/historical-revisions-2011.cfm Summary of Returns January 2011 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 20.8 33.1 51.6 13.9 19.3 55.4 56.0 31.3 6.2 49.8 Conditions New Orders 10.6 36.0 50.3 12.4 23.6 49.9 52.5 33.1 9.2 43.3 Shipments 5.2 31.0 49.6 17.6 13.4 46.3 54.4 33.0 11.6 42.7 Unfilled Orders 4.0 21.9 62.3 13.2 8.7 14.4 24.4 59.0 12.6 11.8 Delivery Times 7.0 12.7 75.9 10.3 2.3 9.8 19.8 72.2 6.3 13.5 Inventories -5.9 23.6 57.1 16.7 6.8 5.1 29.1 53.1 15.2 13.9 Prices Paid 47.9 54.3 45.6 0.0 54.3 61.3 66.4 31.5 0.0 66.4 Prices Received 9.4 25.9 65.3 8.8 17.1 27.5 42.5 44.9 4.3 38.2 Number of Emp. 4.3 24.7 67.1 7.1 17.6 32.1 38.2 50.8 7.2 31.0 Avg. Emp. Wrkwk 16.8 21.9 54.2 11.3 10.6 25.5 28.7 56.2 5.8 22.9 Capital Ex. -- -- -- -- -- 30.0 35.0 52.3 6.0 29.0 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 January 18, 2011.