December 2012 Manufacturing activity rebounded this month, according to firms responding to the December Business Outlook Survey. Following reported declines in business activity in late October and early November from the effects of Hurricane Sandy, most of the survey’s measures showed notable improvement this month. The survey's broad indicators of future activity also showed improvement this month. Indicators Suggest a Pickup at Year-End The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of -10.7 in November to 8.1 this month. This is the highest reading since April and is slightly above the reading before the post-storm decline in November (see Chart). The demand for manufactured goods picked up: the new orders index increased 15 points, from -4.6 in November to 10.7 this month. The current shipments index also improved notably, rising by 25 points. Labor market conditions at the reporting firms improved marginally this month. The current employment index, at 3.6, registered its first positive reading in six months. The percentage of firms reporting increases in employment (20 percent) narrowly exceeded the percentage reporting decreases (16 percent). Firms also indicated an increase in the average workweek compared to last month. Prices Received Index Moves Higher The indexes for prices received for respondents’ own manufactured goods and prices paid for purchased inputs suggest modest price pressures. The percentage of firms reporting higher prices for their own manufactured goods edged up from 16 percent to 20 percent, and the prices received index increased 9 points, to 15.4. The prices paid index was virtually unchanged at 27.8; 30 percent of the firms reported higher prices for inputs. Six-Month Indicators Improve The survey’s future indicators suggest improved optimism among the reporting manufacturers. The future general activity index increased from 20.0 to 30.9, its highest reading in three months (see Chart 1). The percentage of firms expecting increases in activity over the next six months (47 percent) exceeded the percentage expecting decreases (16 percent) by a significant margin. The indexes for future new orders and shipments improved, rising 12 and 7 points, respectively. The future employment index also increased notably, from 4.2 to 14.8. 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 (7.2 percent). In contrast, other labor costs (wages and non-health-care benefits) are expected to rise only 2.1 and 2.3 percent, respectively. All other nonlabor expense categories are expected to increase in 2013: raw materials (2.6 percent), intermediate goods (2.2 percent), and energy (0.8 percent). Firms were also asked how the expected cost increases will compare to 2012 costs. In every category, the share of firms indicating that their costs would be higher in 2013 was greater than the share reporting that their costs would be lower. Summary The December Business Outlook Survey suggests that activity in the region’s manufacturing sector rebounded this month. Firms reported increases in overall activity, new orders, shipments, and employment compared to the declines reported in November following Hurricane Sandy. A slightly increased share of firms reported receiving higher prices for their manu-factured goods this month. The survey’s future activity indexes suggest that firms expect growth to continue over the first six months of 2013. Special Questions (December 2012) 1. What percentage change in costs do you expect for the following categories in 2013? Energy Other Raw Intermediate Wages Health Nonhealth Materials Goods Benefits Benefits Decline of more than 4% 1.3 0 0 0 2.6 0 Decline of 3-4% 5.3 1.3 0 0 0 1.3 Decline of 2-3% 11.8 2.6 0 0 0 1.3 Decline of 1-2% 9.2 3.9 0 0 0 0 No Change 15.8 14.5 17.1 13.2 7.9 19.7 Increase of 1-2% 17.1 19.7 23.7 22.4 0 18.4 Increase of 2-3% 19.7 19.7 23.7 42.1 5.3 21.1 Increase of 3-4% 3.9 15.8 14.5 15.8 9.2 19.7 Increase of 4-5% 7.9 3.9 7.9 2.6 11.8 9.2 Increase of 5-7.5% 2.6 6.6 2.6 0 14.5 1.3 Increase of 7.5-10% 0 2.6 0 0 22.4 1.3 Increase of 10-12.5% 0 3.9 0 0 6.6 1.3 Increase of 12.5-15% 0 0 0 0 3.9 0 Increase of more than 15% 0 0 0 0 11.8 0 Avg. Expected Change 0.8 2.6 2.2 2.1 7.2 2.3 2) How do these expected costs compare with those in 2012? Energy Other Raw Intermediate Wages Health Nonhealth Materials Goods Benefits Benefits Higher 36.8 40.8 40.8 42.1 59.2 34.2 Same 31.6 46.1 50.0 50.0 23.7 55.3 Decrease 26.3 9.2 1.3 3.9 13.2 5.3 * Percentages may not add up to 100 percent because some reporters did not respond to the questions. Summary of Returns December 2012 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 -10.7 25.5 52.6 17.4 8.1 20.0 46.6 25.3 15.7 30.9 Conditions New Orders -4.6 31.7 45.4 21.0 10.7 24.5 50.5 24.1 14.3 36.2 Shipments -6.7 41.4 34.2 23.1 18.3 27.2 48.9 24.0 15.2 33.7 Unfilled Orders -4.6 17.0 65.5 14.6 2.3 3.8 17.3 54.9 13.0 4.3 Delivery Times -13.8 12.4 74.0 13.6 -1.2 -5.0 17.6 60.8 10.2 7.5 Inventories -12.5 16.3 55.9 27.8 -11.5 -0.2 21.1 47.8 26.1 -5.0 Prices Paid 27.9 30.2 67.2 2.5 27.8 51.7 48.7 41.1 0.0 48.7 Prices Received 6.3 20.2 75.0 4.8 15.4 13.7 36.9 49.6 7.9 29.0 Number of Emp. -6.8 19.6 61.0 16.0 3.6 4.2 26.6 51.4 11.8 14.8 Avg. Emp. Wrkwk -6.2 18.5 66.7 14.2 4.2 7.9 26.9 52.2 9.3 17.7 Capital Ex. -- -- -- -- -- -0.2 28.3 44.9 14.9 13.4 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 December 18, 2012. November 2012 Firms responding to the November Business Outlook Survey reported declines in business activity this month following the disruptive effects of Hurricane Sandy on the region. The survey’s indicators for general activity, which had shown improvement in October, fell back into negative territory this month. Firms reported slight declines in shipments, employment, and hours worked. Indicators for the firms’ expectations over the next six months were near their levels in the previous month, but expectations for future employment and capital spending have weakened in the last two months. Indicators Suggest Diminished Activity The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased 16 points, to a reading of -10.7. The fallback of the general activity index followed a single positive reading in October that was preceded by five negative monthly readings (see Chart). Nearly 32 percent of firms reported declines in activity this month, while 21 percent reported increases. The demand for manufactured goods, as measured by the current new orders index, declined 4 points from last month and remains in negative territory. Shipments also fell this month: The current shipments index fell 7 points, to -6.7. Declines in inventories were also more widespread this month; 31 percent of firms reported declines compared with 21 percent in October. Labor market conditions at the reporting firms remained weak this month. The current employment index, at -6.8, was slightly improved from its negative reading in October (-10.7) but has remained negative for five consecutive months. The percentage of firms reporting decreases in employment (20 percent) exceeded the percentage reporting increases (13 percent). Firms also indicated fewer hours worked: The average workweek index was virtually unchanged but posted its eighth consecutive negative reading. Price Indexes Drift Higher The indexes for prices paid for purchased inputs and for prices received for respondents’ own manufactured goods moved higher this month. The prices paid index increased from 19.0 to 27.9, but the increase was attributable to fewer firms reporting lower prices rather than more firms reporting price increases. With respect to their own manufactured goods, the percentage reporting an increase in product prices (16 percent) was greater than the percent reporting a decrease (10 percent). The prices received index increased marginally, from 5.4 to 6.3. Six-Month Indicators Are Mixed Most of the survey’s future indicators suggest modest optimism among the reporting manufacturers. The future general activity index fell modestly from 21.6 to 20.0 (see Chart 1). The percentage of firms expecting increases in activity over the next six months (43 percent) exceeded the percentage expecting decreases (23 percent) by a significant margin. The indexes for future new orders and shipments improved modestly, rising 3 and 7 points, respectively. The future employment index also fell from 8.0 to 4.2, its second consecutive month of decline. Firms’ expectations for future capital spending have also shown weakness in the last two months; the index registered its second consecutive negative reading. In supplemental questions, firms were asked about disruption in business following Hurricane Sandy, which passed through the region in the final days of October (see Special Questions). The average number of days on which firms experienced reduced activity was 2.2. Nearly a third of the firms indicated that activity was reduced for three days or more. Out of the number of days on which activity was reduced, the average length of time that businesses were either shut down or severely crippled was 1.3 days. Summary The November Business Outlook Survey suggests that activity in the region’s manufacturing sector fell back this month. Firms reported declines in overall activity, new orders, shipments, and employment. But the influence of the recent storm in terms of lost production in the short run and reduced activity for longer periods was evident in firms’ responses to questions about the storm’s impact on business activity. The survey’s future activity indexes suggest that firms expect growth over the next six months; however, expectations for future employment and capital spending continue to show moderation. Special Questions (November 2012) For how many business days, if any, did your establishment experience a reduction in business activity as a result of the storm? Out of those days that activity was reduced, how many days was your business shut down or severely crippled? Days % Reporting Reduced % Reporting Shut Down Activity or Severely Crippled 0 Days 13.4% 25.4% 1 Day 17.9% 35.8% 2 Days 37.3% 31.3% 3 Days 23.9% 6.0% > 3 Days 7.5% 1.5% Total 100.0% 100.0% Summary of Returns November 2012 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 5.7 21.1 47.2 31.7 -10.7 21.6 43.1 31.8 23.0 20.0 Conditions New Orders -0.6 27.4 40.6 32.0 -4.6 21.2 45.4 33.6 21.0 24.5 Shipments -0.2 26.4 40.5 33.1 -6.7 20.6 47.9 30.3 20.7 27.2 Unfilled Orders -6.3 14.8 63.3 19.4 -4.6 10.7 20.2 57.0 16.4 3.8 Delivery Times -15.9 10.4 62.4 24.2 -13.8 -0.3 12.7 64.9 17.7 -5.0 Inventories 2.1 18.7 50.0 31.3 -12.5 0.5 23.4 51.9 23.7 -0.2 Prices Paid 19.0 28.8 69.1 0.9 27.9 49.1 51.7 48.3 0.0 51.7 Prices Received 5.4 16.3 72.7 10.0 6.3 14.9 22.3 64.5 8.6 13.7 Number of Emp. -10.7 12.8 65.9 19.6 -6.8 8.0 22.1 58.5 18.0 4.2 Avg. Emp. Wrkwk -7.6 17.4 52.9 23.6 -6.2 11.1 24.6 53.7 16.7 7.9 Capital Ex. -- -- -- -- -- -1.9 19.5 54.0 19.7 -0.2 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 13, 2012. October 2012 Firms responding to the October Business Outlook Survey reported a modest improvement in business activity this month. The survey’s indicators for general activity returned to positive territory, while new orders and shipments recorded levels near zero. But firms reported continuing declines in employment and hours worked. Indicators for the firms’ expectations over the next six months remained positive Indicators Suggest Modest Improvement The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased 8 points, to 5.7, marking the first positive reading since April (see Chart). A little over 28 percent of firms reported increases in activity this month, up from 21 percent last month. The demand for manufactured goods, as measured by the current new orders index, decreased 2 points, to -0.6. Shipments rebounded from last month but were roughly flat this month. The current shipments index increased 21 points, to -0.2; inventories were near steady; and firms reported continued declines in unfilled orders and shorter delivery times. Labor market conditions at the reporting firms remained weak this month. The current employment index dipped 3 points, to -10.7, its lowest reading since September 2009. Twice as many firms reported decreases in employment (22 percent) as reported increases (11 percent). Firms also indicated fewer hours worked: The average workweek index, at -7.6, was negative for the seventh consecutive month. Price Indexes Increase Slightly More firms reported paying higher prices for inputs, and the prices received for manufactured goods rose modestly this month. The prices paid index increased from 8 last month to 19 in October, with 30 percent of the firms reporting input price increases. With respect to their own manufactured goods, the percentage reporting an increase in prices (19 percent) was greater than the percentage reporting a decrease (14 percent). The prices received index rose to 5.4 from -0.2. Six-Month Indicators Positive, But Subdued Most of the survey’s future indicators remained positive this month but fell from September’s readings. The future general activity index decreased from 41.2 to 21.6 (see Chart). Despite the drop in the index, the percentage of firms expecting increases in activity over the next six months (42 percent) was twice the percentage expecting decreases (20 percent). This was also the case for the indexes for future new orders and shipments: Despite decreases of 28 and 22 points, respectively, roughly twice as many firms still expect increases in new orders and shipments than decreases over the next six months. The future employment index also fell from September but remained positive at 8.0. The share of firms expecting to increase employment over the next six months (22 percent) was greater than the share expecting to decrease employment (14 percent). The percentage of firms expecting to decrease capital spending (19 percent) is slightly higher than the percentage expecting to increase it (18 percent). The future capital expenditures index decreased 7 points, to -1.9 in October, its first negative reading since September 2009. 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 (32 percent) narrowly outnumbered those that decreased their workforce (31 percent), and the mix of employment has changed for many firms. For example, 65 percent of firms indicated that they use temporary or agency workers, and 28 percent of these firms indicated that they have increased the total share of these workers over the past year. Summary The October Business Outlook Survey suggests that activity among the region’s manufacturing sector has steadied, following several months of reported declines. However, firms reported flat new orders and shipments and declines in employment. Prices for firms’ manufactured goods were moderately higher this month, while increases in input prices were more widespread. The future activity index decreased this month but remained positive, and firms are still generally optimistic regarding growth over the next six months. Special Questions (October 2012) 1. Has your total workforce decreased, increased, or stayed the same over the last year? Decreased 31.1% Stayed the same 32.4% Increased 32.4% No response 4.1% Total 100.0% 2. How has your mix 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 26.0 54.8 19.2 100.0 Regular Part-Time 66.2 | 33.8 5.6 50.7 9.9 100.0 Short-Term Workers 55.5 | 44.8 7.5 43.3 4.5 100.0 On-Call Workers 40.9 | 59.1 1.5 36.4 3.0 100.0 Temporary or Agency Workers 65.2 | 34.8 10.1 27.6 27.5 100.0 Independent Contract Workers 46.3 | 53.7 1.5 34.3 10.5 100.0 October 2012 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 -1.9 28.4 46.7 22.7 5.7 41.2 41.7 32.1 20.1 21.6 Conditions New Orders 1.0 26.7 45.1 27.3 -0.6 49.4 41.0 33.6 19.8 21.2 Shipments -21.2 30.3 39.3 30.5 -0.2 42.9 41.4 33.5 20.9 20.6 Unfilled Orders -8.2 17.1 56.2 23.4 -6.3 13.8 23.7 56.2 13.0 10.7 Delivery Times -8.4 6.8 67.3 22.7 -15.9 6.8 16.8 61.9 17.1 -0.3 Inventories -21.7 23.1 51.5 21.1 2.1 -4.7 18.4 53.3 18.0 0.5 Prices Paid 8.0 29.5 59.1 10.6 19.0 38.0 51.2 39.4 2.1 49.1 Prices Received -0.2 18.9 67.6 13.5 5.4 27.2 22.9 62.5 8.0 14.9 Number of Emp. -7.3 10.9 67.5 21.6 -10.7 21.4 22.2 57.6 14.2 8.0 Avg. Emp. Wrkwk -7.3 16.8 54.0 24.4 -7.6 14.6 28.2 51.8 17.1 11.1 Capital Ex. -- -- -- -- -- 4.8 17.5 56.9 19.4 -1.9 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 October 16, 2012. September 2012 Firms responding to the September Business Outlook Survey reported nearly flat business activity this month. The survey’s indicators for general activity and new orders both improved from last month but recorded levels near zero. Firms reported continuing declines in shipments, employment, and hours worked. Indicators for the firms’ expectations over the next six months, however, improved notably this month, although the same firms forecast continued deceleration in production growth in the fourth quarter. Indicators Suggest Flat Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased 5 points, to a reading of -1.9. Although this marks the fifth consecutive negative reading for the index, the index has been edging nearer to zero over the last three months (see Chart 1). Nearly 23 percent of firms reported declines in activity this month, down from 30 percent last month. The demand for manufactured goods, as measured by the current new orders index, improved 7 points from last month and recorded its first positive reading in five months. Shipments fell notably this month, however: The current shipments index fell 10 points to -21.2. Declines in inventories were more widespread this month, and firms reported continued declines in unfilled orders and shorter delivery times. Labor market conditions at the reporting firms remained weak this month. The current employment index, at -7.3, was little changed from its reading in July and August. The percentage of firms reporting decreases in employment (22 percent) exceeded the percentage reporting increases (15 percent). Firms also indicated fewer hours worked: The average workweek index increased 7 points but posted its sixth consecutive negative reading. Price Indexes for Output Remain Steady The prices firms paid for purchased inputs rose modestly this month, while prices for their final manufactured goods re-mained steady. The prices paid index decreased from 11.2 to 8.0, with 24 percent of the firms reporting input price increases. With respect to their own manufactured goods, firms reported steady prices, on balance. The percentage reporting an increase in product prices was offset by the same percentage reporting a decrease (13 percent). Six-Month Indicators Show Improvement Most of the survey’s future indicators improved from their readings in August. The future general activity index increased from 12.5 to 41.2 (see Chart 1). The percentage of firms expecting increases in activity over the next six months (50 percent) exceeded the percentage expecting decreases (9 percent) by a large margin. The indexes for future new orders and shipments also increased, each rising 31 points. The future employment index also improved, increasing 11 points. The share of firms expecting to increase employment over the next six months (32 percent) was greater than the share expecting to decrease employment (11 percent). In supplemental questions, firms were asked to estimate their total production growth for the third quarter ending this month and expected growth for the fourth quarter (see Special Questions). Firms forecasting total decreases in third quarter production (47 percent) exceeded those forecasting increases (35 percent). The average production growth rate for the reporting group was an expected decline of nearly 1 percent. With regard to the fourth quarter, the percentage of firms expecting a deceleration in the rate of their production growth (45 percent) was greater than the percentage expecting acceleration in growth (32 percent). Summary The September Business Outlook Survey suggests that activity among the region’s manufacturing sector has steadied, following several months of reported declines. Firms reported declines in shipments and employment, however. Prices of firms’ manufactured goods were moderately higher this month, although output prices remained steady. The survey’s future indexes recorded notable increases this month, suggesting that firms are more optimistic regarding growth over the next six months. However, firms reported that they expect continued weakness for the remainder of this year. Special Questions (September 2012) 1. How will your firm’s total production for the third quarter compare with that of the second quarter? % Lower 46.8 No change 18.2 Higher 35.1 Average rate of change: -0.7%* 2. For the upcoming fourth quarter, what growth do you expect for production at your plant compared to the third quarter? % subtotals Significant deceleration 6.4 Some deceleration 24.4 Slight deceleration 14.1 44.9 No change 20.5 20.5 Slight acceleration 18.0 Some acceleration 10.3 Significant acceleration 3.8 32.1 N.R. 2.5 2.5 Total 100.0 100.0 *Firms provided estimates for third quarter growth within specific numerical ranges. Summary of Returns September 2012 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 -7.1 20.7 56.8 22.5 -1.9 12.5 50.2 34.6 9.0 41.2 Conditions New Orders -5.5 24.4 48.9 23.4 1.0 18.5 56.7 28.5 7.3 49.4 Shipments -11.3 16.4 42.9 37.6 -21.2 11.7 52.4 30.8 9.6 42.9 Unfilled Orders -16.2 12.0 64.5 20.2 -8.2 1.2 25.6 57.7 11.8 13.8 Delivery Times -12.2 9.5 70.3 17.9 -8.4 -0.8 19.9 57.9 13.1 6.8 Inventories -6.9 8.4 59.8 30.1 -21.7 -6.2 21.6 46.0 26.3 -4.7 Prices Paid 11.2 24.0 59.9 16.1 8.0 33.1 44.7 40.5 6.8 38.0 Prices Received 2.8 12.9 74.0 13.1 -0.2 20.3 32.7 52.4 5.4 27.2 Number of Emp. -8.6 14.6 60.1 21.9 -7.3 10.8 32.3 51.8 10.8 21.4 Avg. Emp. Wrkwk -14.6 8.5 72.9 15.8 -7.3 4.8 25.7 55.1 11.1 14.6 Capital Ex. -- -- -- -- -- 9.1 18.2 58.7 13.4 4.8 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 September 18, 2012. August 2012 Firms responding to the August Business Outlook Survey continued to report weakness in overall business conditions. The survey’s indicators for general activity and new orders remained negative for the fourth consecutive month, but both increased slightly from July. Firms also reported slight overall declines in employment and shorter work hours this month. Indicators of expected activity over the next six months remained positive but moderated for the second consecutive month. Indicators Suggest Continued Weakness The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased 6 points, to a reading of -7.1. This marks the fourth consecutive negative reading for the index but also its highest reading since May (see Chart 1). Nearly 30 percent of firms reported declines in activity this month, exceeding the 22 percent that reported increases. Indexes for new orders and shipments remained negative. The new orders index improved one point, while the shipments index fell 3 points. Labor market conditions at the reporting firms deteriorated slightly this month. The current employment index, at -8.6, remained near its reading in the previous month. The percent of firms reporting decreases in employment (15 percent) exceeded the percent reporting increases (7 percent). Firms also indicated fewer hours worked this month: The average workweek index increased 3 points but posted its fifth consecutive negative reading. Price Indexes for Output Near Steady Indexes for prices paid and prices received both increased from their readings in July. The prices paid index increased from 3.7 to 11.2. The percentage of firms reporting higher input prices was 26 percent; 19 percent reported higher prices last month. Fifteen percent of the firms reported declines in input prices. With respect to their own manufactured goods, however, firms reported near-steady prices. While the percentage reporting an increase in product prices (13 percent) was slightly higher than the percentage reporting a decrease (10 percent), 73 percent reported steady prices. The prices received index edged up slightly, from to 1.6 to 2.8. Six-Month Indicators Moderate Most of the survey’s future indicators deteriorated from their readings in July but still suggest that firms are expecting growth over the next six months. The future general activity index decreased slightly, from 19.3 to 12.5 (see Chart 1). The percentage of firms expecting increases in activity over the next six months (35 percent) remains higher than the percentage expecting decreases (23 percent). The indexes for future new orders and shipments remained positive but also fell, decreasing 8 and 7 points, respectively. The future employment index was virtually unchanged, with the share of firms expecting to increase em-ployment (20 percent) greater than the share expecting to decrease employment (9 percent). In special questions this month, firms were asked about the importance of seasonal factors in production (see Special Questions). About 43 percent of firms indicated that seasonal factors have a significant influence on monthly production levels. Over 32 percent of the firms scheduled shutdowns or slowdowns during July and August this year, only slightly more than in the previous year when the same question was asked. But, on balance, the effects of shutdowns on production 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 lower than the number indicating that production decreases were less than usual. Summary The August Business Outlook Survey suggests that firms in the region’s manufacturing sector are continuing to experience weaker overall activity. More firms reported declines in new orders, shipments, and employment than reported increases. Prices of firms’ manufactured goods were near steady this month, although input prices edged slightly higher. The outlook, while not as optimistic as last month, suggests that firms still believe that activity will increase from current levels over the next six months. Special Questions (August 2012) 1) How important are seasonal factors in your monthly production levels? 2012 (%) 2011 (%) Significant 43.2 39.5 Not Significant 54.3 59.2 NR 2.5 1.3 2) Have seasonal factors become more or less important for your business over time? More important 12.4 13.2 Less important 19.8 15.8 No difference over time 61.7 60.5 NR 6.2 10.5 3) Did you schedule plant shutdowns or production slowdowns during the summer months this year? Yes 32.1 29.0 No 66.7 60.5 NR 1.2 10.5 If yes, which of the following best characterizes your expected shutdowns/slowdowns for this July and August? 2012 (%) 2011 (%) July August July August Production decreases 8.6 6.2 6.6 6.6 greater than usual Production decreases 27.2 19.8 17.1 5.3 about the same as usual Production decreases 11.1 11.1 5.3 5.3 less than usual Not applicable 53.1 63.0 71.0 82.8 Summary of Returns August 2012 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 -12.9 22.4 48.1 29.5 -7.1 19.3 35.3 32.2 22.7 12.5 Conditions New Orders -6.9 29.3 35.8 34.8 -5.5 26.1 38.9 28.4 20.4 18.5 Shipments -8.6 25.7 37.4 37.0 -11.3 19.0 38.3 24.3 26.6 11.7 Unfilled Orders -9.5 11.9 59.5 28.0 -16.2 3.3 17.8 55.8 16.6 1.2 Delivery Times -15.7 5.6 75.6 17.8 -12.2 -13.0 10.5 65.5 11.3 -0.8 Inventories -7.5 21.3 50.6 28.1 -6.9 -16.0 16.4 50.4 22.6 -6.2 Prices Paid 3.7 26.2 58.8 15.0 11.2 22.8 41.5 39.9 8.4 33.1 Prices Received 1.6 12.8 72.7 10.1 2.8 14.6 30.0 48.3 9.8 20.3 Number of Emp. -8.4 6.8 77.0 15.4 -8.6 11.3 19.5 59.8 8.7 10.8 Avg. Emp. Wrkwk -17.3 10.4 64.7 24.9 -14.6 14.5 19.6 52.0 14.9 4.8 Capital Ex. -- -- -- -- -- 3.3 25.1 44.7 16.1 9.1 Notes: (1) Items may not add to 100 percent because of omission by respondents. (2) All data are seasonally adjusted. (3) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (4) Survey data reflect information received through August 14, 2012. July 2012 Firms responding to the July Business Outlook Survey continued to report weak business conditions. Although the survey’s indicators for general activity, new orders, and shipments improved from June, they remained negative this month, suggesting overall declines in business. Firms also reported declines in employment this month and shorter work hours. The manufacturers reported near-steady input and output prices this month. The survey’s indicators of activity over the next six months remained positive but moderated somewhat from June. Indicators Suggest Continued Decreases The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of -16.6 in June to -12.9. This marks the third consecutive negative reading for the index (see Chart 1). Nearly 32 percent of the firms reported declines in activity this month, exceeding the 19 percent that reported increases. Indexes for new orders and shipments remained negative but increased 12 and 8 points, respectively. Labor market conditions at the reporting firms deteriorated this month. The current employment index decreased 10 points, to -8.4, its second negative reading in three months. The percent of firms reporting decreases in employment (18 percent) exceeded the percent reporting increases (10 percent). Firms also indicated fewer hours worked this month: The average workweek index increased 2 points but posted its fourth consecutive negative reading. Price Indexes Reflect Steady Prices Indexes for prices paid and prices received both increased slightly from their readings in June but suggest near-steady prices this month. The prices paid index, which turned negative last month, increased from -2.8 to 3.7. Sixty-five percent of the firms reported steady input prices, and the 19 percent reporting higher prices was nearly offset by the 15 percent reporting declines. Firms also reported near-steady prices received for their own products. While slightly more firms reported an increase in product prices (13 percent) than reported a decrease (11 percent), 76 percent reported steady prices. The prices received index rose from -6.9 to 1.6. Six-Month Indicators Moderate The future general activity index remained virtually unchanged at 19.3 this month (see Chart 1). The percentage of firms ex-pecting increases in activity over the next six months (37 percent) is significantly higher than the percentage expecting de-creases (18 percent). The indexes for future new orders and shipments remained positive but fell back notably, decreasing 12 and 19 points, respectively. The future employment index declined 7 points, although the share of firms expecting to increase employment still outnumbered those expecting to decrease employment 2:1. In special questions, firms were asked about recent demand for their own goods and to characterize reasons for slowing. The percentage indicating that demand had decreased over the past two months (37 percent) was higher than the percentage reporting an increase (30 percent). Of those firms that experienced some slowing, the most frequently cited reasons were increased uncertainty about the economy (65 percent) and about future tax rates and government regulation (52 percent). Firms were also asked to forecast production in the third quarter compared to the second quarter. The median and average forecasts call for virtually flat to slight declines in levels of production during the third quarter. Nearly 22 percent expect decreases of greater than 4 percent; 12 percent expect increases greater than 4 percent. Summary The July Business Outlook Survey suggests that firms in the region’s manufacturing sector are continuing to experience declines in overall activity. More firms reported declines in new orders, shipments, and employment than reported increases. Prices, on balance, were near steady this month. The outlook among reporting firms, while not as optimistic as last month, suggests that firms believe that activity will rebound over the next six months. Special Questions (July 2012) 1. Over the past two months, how would you characterize the demand for your manufactured products? % Subtotal Increased significantly 4.1 Increased moderately 26.0 30.1% No change 21.9 Decreased moderately 34.2 Decreased significantly 2.7 36.9% 2. If you have experienced a recent slowing in growth in demand, to what do you attribute the slowdown? (Choose all factors that apply.) % Increased uncertainty about the economy 65 Increased uncertainty about future tax rates or government regulations 52 Seasonal factors 39 A slowing in export demand 22 The lack of federal government spending 9 The lack of state and local government spending 7 Cost factors and pricing associated with energy, commodities, or transportation 7 3. What percentage change do you anticipate for production in the third quarter over the second quarter? % Subtotal Increase of more than 4% 12.3 Increase of 2-4% 16.4 Increase of 0-2% 6.8 35.5% No change 15.1 Decline of 0-2% 13.7 Decline of 2-4% 11.0 Decline of more than 4% 21.9 46.6% Average: -0.5%, Median: 0 Summary of Returns July 2012 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 -16.6 18.7 44.0 31.6 -12.9 19.5 37.2 36.5 17.9 19.3 Conditions New Orders -18.8 28.6 34.7 35.5 -6.9 38.2 42.4 35.6 16.4 26.1 Shipments -16.6 23.1 45.2 31.7 -8.6 38.0 37.0 37.8 17.9 19.0 Unfilled Orders -16.3 17.2 56.1 26.7 -9.5 2.5 21.5 59.2 18.2 3.3 Delivery Times -15.5 1.8 77.9 17.4 -15.7 -7.3 4.7 67.8 17.7 -13.0 Inventories -8.7 20.1 52.2 27.6 -7.5 -12.0 13.5 47.4 29.4 -16.0 Prices Paid -2.8 19.0 64.7 15.3 3.7 20.1 33.9 46.3 11.1 22.8 Prices Received -6.9 12.7 75.5 11.1 1.6 13.5 26.1 54.9 11.5 14.6 Number of Emp. 1.8 9.9 71.8 18.3 -8.4 18.7 23.7 55.2 12.4 11.3 Avg. Emp. Wrkwk -19.1 11.3 57.2 28.6 -17.3 -0.8 22.3 58.6 7.8 14.5 Capital Ex. -- -- -- -- -- 19.4 26.8 40.4 23.5 3.3 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 July 17, 2012. June 2012 Firms responding to the June Business Outlook Survey indicated weaker business conditions this month. The survey’s indicators for general activity, new orders, shipments, and average work hours were all negative this month, suggesting overall declines in business. Input price pressures were less in evidence this month, with more firms reporting declines in input prices. And for the second consecutive month, more firms reported declines in prices for their products than reported increases. The survey’s indicators of future activity remained positive and improved slightly, suggesting that the current weakness in activity is expected to be short-lived. Indicators Suggest Decreases in Activity The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of -5.8 in May to -16.6, its second consecutive negative reading (see Chart 1). Nearly 40 percent of the firms reported declines in activity this month, exceeding the 22 percent that reported increases in activity. Indexes for new orders and shipments also showed notable declines, falling 18 and 20 points, respectively. Indexes for current unfilled orders and delivery times both registered negative readings again this month, suggesting lower levels of unfilled orders and faster deliveries. Firms’ responses suggest steady employment this month but shorter hours. The percentage of firms reporting higher employment (14 percent) edged out the percentage reporting lower employment (12 percent). The current employment index increased 3 points this month. Firms indicated fewer hours worked this month: the average workweek index decreased 14 points and posted its third consecutive negative reading. Price Indexes Decline This Month Indexes for prices paid and prices received both decreased and were negative this month, suggesting that price pressures have moderated notably. The prices paid index fell to -2.8, its first negative reading since July 2009. Nearly 16 percent of firms reported declines in input prices; 13 percent reported increases. Firms also reported that the prices received for their own products fell: For the second consecutive month, more firms reported a decrease in product prices (17 percent) than reported an increase (10 percent). Despite Weakening, Outlook Remains Positive The future general activity index improved from a reading of 15.0 in May to 19.5 in June (see Chart 1). Although area manufacturers are not as optimistic as they were earlier in the year, the percentage of firms expecting increases in activity over the next six months (34 percent) is higher than the percentage expecting decreases (14 percent). The indexes for future new orders and shipments remained positive and also improved, increasing 12 and 17 points, re-spectively. In special questions this month, firms were asked about their plans for capital spending over the next six to 12 months. The share of firms expecting to increase their capital spending on plant and equipment (32 percent) was greater than the share planning reductions (20 percent). On balance, these responses represent some improvement over the responses received when the same question was asked in November 2011. Although slightly fewer firms expect increases than in November, far fewer firms anticipate decreases in capital spending. There was a significant increase in the share of firms that expect to keep capital spending constant (from 25 percent in November to 42 percent in June). Summary The June Business Outlook Survey suggests that firms in the region’s manufacturing sector are experiencing declines in overall activity this month. Firms reported a notable falloff in new orders and shipments. Overall, em-ployment remained steady, but average work hours were lower. Price pressures continued to recede this month, and more firms reported declines in prices for their own goods than reported increases. The outlook among the reporting firms, while not as optimistic as in the first quarter, suggests that firms believe that activity will rebound over the next six months. Special Question (June 2012) Do you expect your firm's spending on new plant and equipment over the next six to 12 months to increase, decrease, or remain unchanged relative to your firm's actual spending over the past six to 12 months? 2012 2011* Increase 31.8% 34.7% Decrease 19.7% 33.3% Remain unchanged 42.4% 25.0% *Survey conducted in November 2011. Summary of Returns June 2012 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 -5.8 21.9 39.5 38.5 -16.6 15.0 33.9 47.0 14.3 19.5 Conditions New Orders -1.2 21.4 35.2 40.2 -18.8 26.3 45.5 41.9 7.3 38.2 Shipments 3.5 23.2 37.0 39.8 -16.6 20.8 46.8 39.3 8.8 38.0 Unfilled Orders -9.4 10.2 63.3 26.5 -16.3 5.9 15.8 62.2 13.3 2.5 Delivery Times -14.0 3.1 78.2 18.7 -15.5 -4.3 2.7 81.5 10.0 -7.3 Inventories 4.5 17.6 51.3 26.3 -8.7 -10.8 18.7 48.3 30.6 -12.0 Prices Paid 5.0 12.7 70.9 15.5 -2.8 37.8 28.7 58.1 8.6 20.1 Prices Received -4.5 10.2 70.8 17.1 -6.9 7.7 23.3 61.3 9.8 13.5 Number of Emp. -1.3 13.6 71.5 11.8 1.8 10.6 26.3 57.8 7.6 18.7 Avg. Emp. Wrkwk -5.4 8.8 63.4 27.9 -19.1 -1.1 16.2 62.0 17.0 -0.8 Capital Ex. -- -- -- -- -- 5.3 30.0 56.8 10.5 19.4 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 June 18, 2012. May 2012 Firms responding to the May Business Outlook Survey indicated that manufacturing growth fell back from the pace of recent months. The survey’s broad indicators for general activity fell into negative territory for the first time in eight months. Indicators for new orders and employment also suggested slight declines from April. Input price pressures were less in evidence this month, and for the first time in nine months, more firms reported price declines for their products than reported increases. The survey’s indicators of future activity remained positive but weakened considerably from April. Indicators Suggest Slowing The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from a reading of 8.5 in April to -5.8 in May (see Chart 1). The index for new orders fell four points, from 2.7 to -1.2, its first negative reading in eight months. The shipments index edged 1 point higher and remained just above zero. The indexes for current unfilled orders and delivery times both declined and registered negative readings, suggesting lower levels of unfilled orders and faster deliveries. Firms’ responses suggest a slight decline in employment this month. The current employment index, which had been positive for eight consecutive months, decreased 19 points, to -1.3. The percentage of firms reporting decreases in employment (16 percent) was slightly higher than the percentage reporting increases (14 percent). Firms also reported a slight decrease in average hours worked compared with April. Price Pressures on the Wane Indexes for prices paid and prices received both decreased, suggesting that price pressures moderated this month. Fifteen percent of the firms reported higher prices for inputs this month, compared with 27 percent last month. The prices paid index declined 18 points. Firms also reported that prices received for their own goods fell: More firms reported price decreases (12 percent) than reported increases (8 percent). The prices received index decreased 14 points to its first negative reading in nine months. Firms’ Outlook Less Optimistic The future general activity index fell notably, from a reading of 33.8 in April to 15.0 in May (see Chart 1). The indexes for future new orders and shipments remained positive but fell 9 and 10 points, respectively. While still positive, the future employment index showed notable deterioration this month, decreasing 17 points. In special questions this month, firms were asked about the factors that are influencing their production and hiring plans (see Special Questions). While 54 percent of the firms expect to increase production over the next six months, only 21 percent plan to increase employment; 22 percent expect to increase work hours without increasing staff, and 17 percent plan to increase production by increasing the productivity of existing staff. Firms were asked to rank the three most important factors restraining hiring. The most frequently cited reason was the expectation of slow sales growth. Among the top three factors restraining hiring, the need to keep operating costs low (50 percent) ranked nearly as high as expected low sales growth (51 percent). Uncertainty about health-care costs, the inability to find skilled workers, and uncertainty about regulations and pol-icies were also prominently listed. Summary The May Business Outlook Survey suggests that growth in the region’s manufacturing sector fell back from last month. Firms reported lower levels of activity and nearly flat new orders and employment. Overall price pressures were reported to be on the wane this month. The outlook among the reporting firms was notably less optimistic. Special Questions (May 2012) 1. Which of the following best characterizes your short run production and employment plans over the next six months: We do not expect to increase production 43.9 % We expect to increase production 53.7 % 2. If you expect to increase production, this will be accomplished by: Hiring additional workers 20.7% Increasing work hours without hiring additional workers 22.0% Increasing productivity without hiring additional workers 17.1% NR 40.2% 3. What are the three most important factors, if any, restraining your hiring plans? Please rank the three factors in order from 1 (most important) to 3 (third most important). Most Second Most Third Most Important Important Important Total Expected growth of sales is low. 30.5% 11.0% 9.8% 51.3% Firm wants to keep operating costs low. 9.8% 19.5% 20.7% 50.0% Uncertainty about the cost of health insurance. 4.9% 9.8% 14.6% 29.3% Firm cannot find workers with required skills. 12.2% 7.3% 8.5% 28.0% Uncertainty about regulations or government policies. 8.5% 11.0% 6.1% 25.6% Labor costs are high. 4.9% 9.8% 7.3% 22.0% There are no sources of restraint. 11.0% 3.7% 2.4% 17.1% Current staff is underutilized/ reduced hours. 3.4% 7.9% 2.2% 13.5% Other factors 4.9% 1.2% 1.2% 7.3% Firm's financial position has deteriorated. 0.0% 3.7% 2.4% 6.1% Summary of Returns May 2012 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 8.5 26.8 39.3 32.6 -5.8 33.8 32.4 47.1 17.4 15.0 Conditions New Orders 2.7 34.7 29.5 35.8 -1.2 35.4 41.4 43.5 15.1 26.3 Shipments 2.8 35.0 32.6 31.5 3.5 31.0 39.7 36.5 18.9 20.8 Unfilled Orders 3.2 11.2 64.4 20.6 -9.4 7.4 16.9 67.7 11.0 5.9 Delivery Times -3.4 8.1 67.2 22.1 -14.0 -10.1 10.2 74.1 14.5 -4.3 Inventories 8.2 20.4 61.5 15.9 4.5 9.7 16.6 56.0 27.4 -10.8 Prices Paid 22.5 15.2 74.7 10.2 5.0 35.2 43.1 50.8 5.3 37.8 Prices Received 9.4 7.5 78.6 12.1 -4.5 20.4 18.1 69.4 10.4 7.7 Number of Emp. 17.9 14.2 70.2 15.5 -1.3 27.8 24.8 60.9 14.2 10.6 Avg. Emp. Wrkwk -2.3 12.4 69.8 17.8 -5.4 7.5 15.3 63.4 16.4 -1.1 Capital Ex. -- -- -- -- -- 21.7 21.9 50.8 16.6 5.3 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 May 15, 2012. April 2012 Manufacturing firms responding to the April Business Outlook Survey indicated that regional manufacturing activity ex-panded modestly this month. The survey’s broad indicators for general activity, new orders, and shipments all remained posi-tive but fell slightly from their readings last month. The indicator for current employment, however, showed a notable improvement. Price pressures were only slightly more widespread this month. The survey’s broad indicators of future activity remained at relatively high readings, and firms were more optimistic about their plans for hiring over the next six months. Indicators Suggest Modest Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged down from a reading of 12.5 in March to 8.5 (see Chart 1). Indexes for new orders and shipments remained positive but were slightly weaker than their March readings. The indexes for new orders and shipments, which decreased about 1 point, remain at relatively low readings. The indexes for current unfilled orders increased 14 points and returned to positive territory this month, suggesting a backlog of unfilled orders. Inventories were also reported on the rise this month, with the inventory index increasing 7 points. Firms’ responses suggested a notable pickup in levels of employment this month. The current employment index, which has been positive for eight consecutive months, increased 11 points, to its highest reading in 11 months (see Chart 2). Twenty-seven percent of the firms reported an increase in employment; 9 percent reported declines. The average workweek was near steady this month, with 75 percent of the firms surveyed reporting no change in average hours. Upward Price Pressures Still Evident Indexes for prices paid and prices received both increased, suggesting that price pressures are only slightly more widespread compared to March. Twenty-seven percent of the firms reported higher prices for inputs this month, compared with 25 percent last month. The prices paid index edged 4 points higher. Firms also reported a rise in prices for their own manufactured goods: More firms reported price increases (17 percent) than reported decreases (8 percent). The prices received index, however, increased just 1 point. Firms’ Outlook Still Optimistic The future general activity index increased modestly, from a relatively high reading of 32.9 in March to 33.8 this month (see Chart 1). The indexes for future new orders and shipments remained within 1 point of their previous month’s readings. The future employment index showed notable improvement this month, increasing 6 points and reaching its highest reading in 12 months (see Chart 2). The percentage of firms expecting to increase employment over the next six months (35 percent) was significantly greater than those expecting to decrease employment (7 percent). Summary The April Business Outlook Survey suggests that the region’s manufacturing sector grew modestly this month. All of the broad indicators remained positive, but a greater share of firms reported adding to their payrolls this month. Higher prices for inputs and firms’ own manufactured goods were only slightly more widespread this month. The overall outlook among the reporting firms remains optimistic, with firms’ future employment plans showing notable improvement this month. Summary of Returns April 2012 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 12.5 27.4 52.0 18.9 8.5 32.9 47.0 34.9 13.2 33.8 Conditions New Orders 3.3 25.2 52.0 22.5 2.7 36.4 50.9 29.8 15.5 35.4 Shipments 3.5 23.6 54.5 20.8 2.8 31.3 47.5 32.7 16.5 31.0 Unfilled Orders -11.0 18.5 66.2 15.3 3.2 9.1 22.7 58.1 15.3 7.4 Delivery Times -7.1 12.8 71.0 16.2 -3.4 0.1 9.0 70.4 19.1 -10.1 Inventories 0.9 25.4 56.9 17.2 8.2 5.8 25.7 53.7 16.1 9.7 Prices Paid 18.7 27.0 68.4 4.6 22.5 39.4 40.4 51.0 5.2 35.2 Prices Received 8.4 16.9 75.6 7.5 9.4 25.6 32.9 48.5 12.5 20.4 Number of Emp. 6.8 26.7 62.6 8.8 17.9 21.8 35.1 54.2 7.4 27.8 Avg. Emp. Wrkwk 2.7 10.7 75.1 13.0 -2.3 11.2 20.4 62.4 12.9 7.5 Capital Ex. -- -- -- -- -- 14.1 31.4 52.3 9.6 21.7 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 April 17, 2012. March 2012 Manufacturing firms responding to the monthly Business Outlook Survey suggest that regional manufacturing activity con-tinued to grow at a moderate pace in March. The survey’s broad indicators for general activity, new orders, shipments, and employment all remained positive. Firms continued to report price pressures, but responses suggest that pressures have eased from the previous month. The survey’s broad indicators of future activity remained at levels consistent with continued optimism. Indicators Suggest Continued Expansion The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged slightly higher, from a reading of 10.2 in February to 12.5, its highest reading since April of last year (see Chart). Indexes for new orders and shipments remained positive but weaker than their February levels. The new orders index decreased 8 points, to 3.3, while the shipments index declined 12 points, to 3.5. The indexes for both delivery times and unfilled orders, which recorded slightly positive readings last month, fell back into negative territory this month, suggesting faster deliveries and a decline in unfilled orders. Firms’ responses suggest a slight pickup in levels of employment this month. The current employment index, which has been positive for seven consecutive months, increased 6 points. Twenty-two percent of the firms reported an increase in employment, compared to 15 percent in February. Firms reporting a longer workweek (20 percent) only narrowly outnumbered those reporting a shorter one (17 percent), and the current workweek index decreased 7 points. Upward Price Pressures Moderate Indexes for prices paid and prices received both decreased this month, although positive diffusion indexes for both suggest that overall price pressures remain. Twenty-four percent of the firms reported higher prices for inputs this month, down from 42 percent last month. The prices paid index decreased 20 points, to 18.7, its first monthly decline in five months. On balance, firms also reported a rise in prices for their own manufactured goods: More firms reported price increases (19 percent) than reported decreases (11 percent). The prices received index, however, declined 7 points, the first decrease in five months. Firms’ Outlook Still Optimistic The future general activity index fell modestly, from a reading of 33.3 in February to 32.9 this month. The index remains at a relatively high level (see Chart). The indexes for future new orders and shipments showed slight improvement, increasing 4 points and 2 points, respectively. The future employment index showed little overall change this month. Firms expecting to increase employment over the next six months (33 percent) outnumber those expecting to decrease it (11 percent). In special questions this month, firms were asked about their expectations for production growth for the upcoming second quarter (see Special Questions). Fifty-nine percent of the firms expect increases in production in the second quarter; 23 percent expect decreases. This is in contrast to the situation in March of last year, when 75 percent of the firms were expecting growth and 10 percent were expecting declines in production. The average growth expected among the reporting firms for the second quarter was about 1.4 percent. Nearly 58 percent of the firms said second-quarter production growth would represent an acceleration in growth (6 percent characterized it as “significant acceleration”; 51 percent said the expected growth represented “some acceleration”). Summary According to respondents to the March Business Outlook Survey, the region’s manufacturing sector showed modest improvement this month. All of the broad indicators remained positive, but firms reported only weak growth in new orders and shipments this month. The reporting firms also added to their payrolls this month, suggesting continued improvement in business conditions. Although price pressures remain, they are less widespread than in recent months. The firms’ outlook and employment plans for the next six months remain generally optimistic. Special Questions (March 2012) 1. What change, if any, do you anticipate in your firm’s production during the second quarter of 2012 compared to the first quarter? 2012 2011 Increase of more than 5% 24.2% Increase of 3-5% 10.3% Increase of less than 3% 24.4% Total increase 59.0% 75.3% No change 17.9% Decrease of less than 3% 9.0% Decrease of 3-5% 0.0% Decrease of more than 5% 14.1% Total decrease 23.1% 10.4% 2012: Average 1.4%, Median: 1.5% 2011: Average 2.7%, Median: 3.5% 2. Would this represent an acceleration or deceleration of growth from the first quarter of 2012? Significant acceleration 6.4% Acceleration: Some acceleration 51.3% Total acceleration 57.7% No change 23.1% Some deceleration 11.5% Deceleration: Significant deceleration 6.4% Total decleration 17.9% 3. Does the expected increase or decrease reflect seasonal factors or a change in business conditions? Seasonal factors 20.5% Change in business conditions 51.3% Other 11.5% Percentages may not add to 100 percent because not all firms answered all questions. Summary of Returns March 2012 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 10.2 40.3 28.1 27.7 12.5 33.3 45.4 42.1 12.5 32.9 Conditions New Orders 11.7 37.0 27.8 33.7 3.3 32.5 44.0 44.8 7.6 36.4 Shipments 15.0 33.6 34.8 30.1 3.5 29.0 44.3 42.6 13.0 31.3 Unfilled Orders 2.2 12.7 62.3 23.8 -11.0 8.3 18.1 69.7 9.1 9.1 Delivery Times 1.5 9.3 72.9 16.3 -7.1 -2.7 12.6 70.3 12.6 0.1 Inventories -12.9 21.4 58.2 20.5 0.9 3.9 22.6 55.5 16.8 5.8 Prices Paid 38.7 24.3 67.2 5.6 18.7 50.4 43.4 52.6 4.0 39.4 Prices Received 15 19.1 69.5 10.7 8.4 32.0 32.3 59.1 6.7 25.6 Number of Emp. 1.1 22.2 62.4 15.4 6.8 22.5 32.7 51.1 10.9 21.8 Avg. Emp. Wrkwk 10.1 19.7 58.9 17.0 2.7 10.8 22.7 62.6 11.4 11.2 Capital Ex. -- -- -- -- -- 18.5 28.9 48.1 14.8 14.1 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 March 13, 2012. February 2012 Responses from manufacturing firms polled for this month’s Business Outlook Survey suggest that regional manufacturing activity continued to expand in February. The survey’s broad indicators for general activity, new orders, and shipments all increased from their readings in January. Firms reported near-steady employment levels but an increase in average work hours. More firms reported higher input prices this month, and a sizable share of firms reported price increases for their own manufactured goods. The survey’s broad indicators of future activity fell from levels in recent months but continue to reflect op-timism about future manufacturing growth. Indicators Suggest Continued Expansion The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged higher from a reading of 7.3 in January to 10.2, its highest level since October (see Chart). The demand for manufactured goods also showed improvement this month: The new orders index was positive for the fifth consecutive month and increased from 6.9 to 11.7. The shipments index also remained positive and increased 9 points. The indexes for both delivery times and unfilled orders recorded slightly positive readings this month, compared with their negative readings in January. Firms’ responses suggest near-steady levels of employment this month. The current employment index, which has been positive for six consecutive months, fell from a reading of 11.6 in January to 1.1 this month, suggesting little overall growth in employment. The percentage of firms reporting an increase in employment (14 percent) was only slighter greater than the percentage reporting decreases (13 percent). Firms reporting a longer workweek (20 percent) outnumbered those reporting a shorter one (10 percent), and the current workweek index increased 5 points. Input and Output Prices Edge Higher Indexes for prices paid and prices received both increased this month. Forty-two percent of the firms reported higher prices for inputs this month, up from 35 percent last month. The prices paid index increased 7 points and has now edged higher for four consecutive months. On balance, firms also reported a rise in prices for manufactured goods: More firms reported increases in prices (22 percent) than reported decreases (7 percent). The prices received index increased 4 points, its fourth consecutive increase. Firms’ Outlook Still Optimistic The future general activity index fell from a reading of 49.0 in January to 33.3 this month. The index, which has increased for five consecutive months, remains at a relatively high level (see Chart). The indexes for future new orders and shipments paralleled the decline in the future activity index, decreasing 17 points and 19 points, respectively. The future employment index showed improvement, however, increasing 3 points. Firms expecting to increase employment over the next six months (33 percent) outnumbered those expecting to decrease it (11 percent). In this month’s special questions, firms were asked about their 2012 capital spending plans (see Special Questions). Nearly 36 percent of the firms indicated that total capital spending would be higher this year than in 2011; 23 percent indicated that spending would be lower. Firms that plan to increase capital spending noted that they expect to spend more on noncomputer equipment, software, and computer hardware, and they most frequently cited expected high sales growth, the need for replacement capital, and an improved cash flow or balance-sheet position as the reasons for the increased spending. Summary According to respondents to the February Business Outlook Survey, the region’s manufacturing sector continued to grow this month. All of the broad indicators remained positive, with firms reporting a pickup in new orders and shipments. Price pressures were more widespread this month, and more firms also reported higher prices for their own goods. Firms’ outlook and employment plans for the next six months remain generally optimistic. Special Questions (February 2012) 1. Do you expect the following capital spending categories in 2012 to be higher than, lower than, or the same as last year? Higher Lower Same Diffusion Index % % % (% higher - % lower) Noncomputer equipment 32.1 25.0 39.3 7.1 Software 29.8 14.3 51.2 15.5 Computer and related hardware 23.8 17.9 52.4 6.0 Energy saving investments 17.9 14.3 59.5 3.6 Structures 13.1 17.9 63.1 -4.8 Total capital spending 35.7 22.6 34.5 13.1 2. If you plan to increase total capital spending what are the major factors behind your plan to increase capital spending? * % Expected growth in sales is high 58.8 Need to replace information technology equipment 50.0 Need to replace other capital good 47.1 Firm’s cash flow or balance-sheet position has improved 41.2 Capacity utilization is currently high 32.4 Energy saving investment 17.6 Cost or availability of external finance has improved 8.8 * Percentages may add to greater than 100 because firms were asked to indicate more than one factor if applicable. Summary of Returns February 2012 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 7.3 29.5 51.2 19.3 10.2 49.0 46.2 37.4 12.9 33.3 Conditions New Orders 6.9 24.9 59.1 13.1 11.7 49.7 46.9 33.8 14.4 32.5 Shipments 5.7 27.8 59.2 12.8 15.0 48.2 44.7 37.5 15.7 29.0 Unfilled Orders -4.1 17.4 66.2 15.1 2.2 14.7 21.3 62.4 13.0 8.3 Delivery Times -3.8 11.6 77.5 10.1 1.5 -5.6 13.8 66.5 16.5 -2.7 Inventories -6.3 9.1 69.0 21.9 -12.9 3.3 27.7 45.7 23.8 3.9 Prices Paid 31.8 42.2 53.0 3.5 38.7 52.7 52.3 36.2 1.9 50.4 Prices Received 11.2 22.1 69.4 7.1 15.0 23.8 40.0 47.9 8.0 32.0 Number of Emp. 11.6 13.7 73.1 12.6 1.1 19.1 33.1 53.3 10.6 22.5 Avg. Emp. Wrkwk 5.0 19.8 65.1 9.7 10.1 9.2 24.6 59.7 13.7 10.8 Capital Ex. -- -- -- -- -- 22.9 33.1 42.0 14.6 18.5 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 February 14, 2012. January 2012 Results from the Business Outlook Survey suggest that regional manufacturing activity continued to expand at a moderate pace in January. All of the broad indicators remained positive this month, and firms continued to report increases in employment. Firms polled reported higher input prices this month, with a notable share of firms reporting price increases for their own manufactured goods. The survey’s broad indicators of future activity improved again this month. Indicators Suggest Continued Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, edged up slightly from a revised reading of 6.8 in December to 7.3 in January.* The demand for manufactured goods showed continued growth this month: The new orders index remained positive for the fourth consecutive month but declined from a revised reading of 10.7 in December to 6.9 this month. The shipments index also remained positive but fell 3 points. The indexes for both delivery times and unfilled orders recorded slightly negative readings this month. Firms’ responses continue to suggest that labor market conditions are improving. The current employment index has now been positive for five consecutive months but was virtually unchanged from last month’s reading. The percentage of firms reporting an increase in employment (21 percent) was higher than the percentage reporting a decline (10 percent). Firms reporting a longer workweek (23 percent) only narrowly outnumbered those reporting a shorter one (18 percent). Prices Edge Higher Indexes for prices paid and prices received increased slightly this month. Thirty-five percent of the firms reported higher prices for inputs. The prices paid index increased 1 point and has now edged higher for three consecutive 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). The prices received index increased 1 point, marking its third consecutive increase. Firms’ Outlook Improves The future general activity index increased from a revised reading of 40 in December to 49 this month. The index has increased for five consecutive months and is now at its highest reading in 10 months (see Chart). The indexes for future new orders and shipments remained at relatively high levels and also improved, increasing 6 points and 12 points, respectively. The future employment index increased 8 points. Firms expecting to increase employment over the next six months (28 percent) outnumber those expecting to decrease it (9 percent). In this month’s special questions, firms were asked about the factors that are influencing their hiring plans over the next 12 months (see Special Questions). Among firms 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 factors among firms restraining hiring were the need to keep operating costs low and low expectations for sales growth. Uncertainty about regulations and government policies and the inability to find workers with required skills were also highly ranked factors. Summary According to respondents to the January Business Outlook Survey, the region’s manufacturing sector continued to expand at a moderate pace this month. All of the broad indicators remained positive, with firms reporting a pickup in hiring in recent months. Firms’ outlook showed further improvement this month, with a majority of firms expecting to expand manufacturing activity through the first half of the year. * The survey’s annual historical revisions, which incorporate new seasonal adjustment factors, were released on January 12, 2012. Revisions for selected series from 2007 to 2011 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-2012.cfm. Summary of Returns January 2012 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 6.8 29.6 45.7 22.3 7.3 40.0 55.7 34.3 6.8 49.0 Conditions New Orders 10.7 34.5 37.8 27.6 6.9 44.1 55.1 34.7 5.4 49.7 Shipments 9.1 34.5 34.9 28.8 5.7 36.4 53.8 36.8 5.6 48.2 Unfilled Orders 5.1 17.7 60.5 21.8 -4.1 5.7 19.6 69.2 4.9 14.7 Delivery Times 1.3 15.9 61.1 19.7 -3.8 -0.4 12.5 65.2 18.1 -5.6 Inventories -11.5 19.3 54.5 25.6 -6.3 -5.0 25.0 49.7 21.7 3.3 Prices Paid 30.4 34.8 59.4 3.0 31.8 49.4 53.3 43.3 0.6 52.7 Prices Received 10.3 21.3 68.0 10.2 11.2 26.4 29.4 62.3 5.6 23.8 Number of Emp. 11.5 21.3 67.2 9.7 11.6 10.8 27.8 59.0 8.7 19.1 Avg. Emp. Wrkwk 2.8 23.3 54.5 18.3 5.0 4.5 22.6 60.8 13.4 9.2 Capital Ex. -- -- -- -- -- 10.8 37.1 40.2 14.2 22.9 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 January 17, 2012.