December 2015 Manufacturing conditions in the region weakened this month, according to firms responding to the December Manufacturing Business Outlook Survey. The indicator for general activity, which was slightly positive last month, fell into negative territory. The indexes for new orders and shipments were mixed. Firms reported slight increases in overall employment this month and an increase in average work hours compared with November. Manufactured goods prices, as well as input prices, declined this month. Nearly all of the survey’s future indicators showed notable weakening this month. Most Current Indicators Fall The diffusion index for current activity returned to negative territory this month, decreasing from 1.9 to -5.9. This is the third negative reading in the past four months. The index for current new orders remained negative and fell 6 points, to -9.5. However, firms reported higher shipments, as the current shipments index increased 6 points to a reading of 3.7. Firms reported a decline in unfilled orders, with the index falling from 2.4 to -17.7. The current inventories index increased 9 points to its first positive reading in four months. The survey’s indicators for labor market conditions were slightly improved this month. The percentage of firms reporting increases in employment (16 percent) was slightly greater than the percentage reporting decreases (11 percent). The employment index increased 2 points, from 2.6 to 4.1. Firms also reported an increase in average work hours in December. The workweek index registered its first positive reading in three months, increasing 22 points to 5.5. Manufactured Goods Prices Decline The surveyed firms reported lower prices for their own manufactured goods this month. Although most firms (69 percent) reported no changes in their prices received, the percentage of firms reporting lower prices (18 percent) was greater than the percentage reporting higher prices (10 percent). The current prices received index fell from -0.4 in November to -8.7 this month. Firms reported, on balance, declines in the prices paid for inputs. The percentage of firms reporting lower input prices (18 percent) was greater than the percentage of firms reporting higher input prices (8 percent). The prices paid index remained negative for the third consecutive month and decreased 5 points. Future Indexes Decline The diffusion index for future general activity fell from a reading of 43.4 in November to 23.0 this month. This is the lowest reading for the index since November 2012. The percentage of firms expecting increases over the next six months fell from 50 percent in November to 35 percent this month. Only 12 percent of the firms, however, expect declines in activity over the next six months. Future indexes for new orders and shipments also declined this month, decreasing 17 points and 8 points, respectively. In addition, firms marked down their forecasts for employment increases. The future employment diffusion index decreased 23 points to its lowest reading in three years. Only 13 percent of the firms expect increases in employment over the next six months, down from 33 percent in November. Input and Labor Cost Expectations In this month’s special questions, firms were asked about their expectations for changes in various input and labor costs for the coming year. The responses indicate that the largest average-annual increase is expected to be for health benefits (8 percent). Both wages and nonhealth benefits are expected to rise about 2 percent. Firms were also asked how the expected cost increases for 2016 will compare with this year’s costs. For most categories, a majority of the firms reported that their costs would remain the same. One exception was the health benefits category, with 68 percent expecting higher costs. Summary Overall, manufacturing conditions in the region were weaker this month, according to firms responding to the December survey. The survey’s broad indicators for general activity and new orders were negative. However, responding firms reported slight increases in shipments and employment this month. Firms reported declines in prices of manufactured goods and purchased inputs. Indicators for future conditions remained positive but fell significantly from their readings in November. Special Questions (December 2015)* 1. What percentage change in costs do you expect for the following categories in 2016? Wages & Health Benefits & Energy Other Raw Intermed. Wages Health Nonhealth Nonhealth Materials Goods Benefits Benefits Benefits (%) (%) (%) (%) (%) (%) (%) Decline of >4% 9.4 10.8 3.1 0.0 0.0 0.0 0.0 Decline of 3–4% 10.9 0.0 0.0 0.0 0.0 0.0 0.0 Decline of 2–3% 9.4 1.5 1.6 0.0 0.0 0.0 0.0 Decline of 1–2% 18.8 7.7 0.0 1.5 0.0 4.8 1.6 No Change 32.8 35.4 46.9 9.2 7.7 25.8 3.2 Increase of 1–2% 9.4 20.0 23.4 23.1 3.1 24.2 6.5 Increase of 2–3% 3.1 13.8 21.9 49.2 10.8 27.4 17.7 Increase of 3–4% 1.6 7.7 3.1 15.4 1.5 9.7 24.2 Increase of 4–5% 1.6 0.0 0.0 1.5 15.4 3.2 24.2 Increase of 5–7.5% 0.0 0.0 0.0 0.0 15.4 3.2 6.5 Increase of 7.5–10% 1.6 1.5 0.0 0.0 21.5 0.0 4.8 Increase of 10–12.5% 1.6 1.5 0.0 0.0 7.7 0.0 3.2 Increase of 12.5-15% 0.0 0.0 0.0 0.0 6.2 1.6 4.8 Increase of >15% 0.0 0.0 0.0 0.0 10.8 0.0 3.2 --------------------------------------------------------------------------- Median 0.0 0.0 0.0 2.5 6.3 1.5 3.5 Average -0.7 0.6 0.8 2.2 7.5 1.9 4.8 2. How do these expected costs compare with those in 2015? Wages & Health Benefits & Energy Other Raw Intermed. Wages Health Nonhealth Nonhealth Materials Goods Benefits Benefits Benefits Higher 16.9 13.8 14.0 44.8 68.4 22.8 64.9 Same 52.5 62.1 75.4 50.0 26.3 73.7 31.6 Lower 30.5 24.1 10.5 5.2 5.3 3.5 3.5 * Percentages may not add to 100 percent because some reporters did not respond to the questions. Summary of Returns December 2015 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 Business 1.9 22.4 44.3 28.3 -5.9 43.4 35.3 47.2 12.2 23.0 Conditions New Orders -3.7 22.4 41.0 31.9 -9.5 48.8 45.8 36.0 13.9 31.9 Shipments -2.5 27.6 45.6 23.9 3.7 43.9 51.0 31.1 14.9 36.1 Unfilled Orders 2.4 8.3 59.7 26.0 -17.7 15.5 19.7 61.3 13.2 6.5 Delivery Times 0.5 8.4 71.5 14.5 -6.1 1.6 8.0 75.6 12.7 -4.8 Inventories -7.9 19.1 54.1 17.7 1.4 1.2 20.0 58.9 20.8 -0.8 Prices Paid -4.9 7.7 69.2 17.5 -9.8 20.7 26.0 65.4 5.7 20.3 Prices Received -0.4 9.5 69.1 18.2 -8.7 10.6 21.1 69.4 6.9 14.2 Number of Emp. 2.6 15.6 70.8 11.4 4.1 28.2 13.4 72.2 7.9 5.5 Avg. Emp. Wrkwk. -16.2 15.8 68.4 10.3 5.5 16.6 8.9 77.3 10.7 -1.8 Capital Ex. -- -- -- -- -- 25.9 25.9 56.9 15.0 10.9 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 December 14, 2015. November 2015 Manufacturing conditions in the region showed slight improvement this month, according to firms responding to the November Manufacturing Business Outlook Survey. The indicator for general activity was slightly positive this month, following two months in negative territory. Indexes for new orders and shipments remained negative, although they increased from lower readings in October. Firms reported slight increases in overall employment this month but declines in average work hours. Manufactured goods prices were near steady. The survey’s future indicators showed improvement. Only a small percentage of firms expect a downturn in business activity over the next six months. Current Indicators Improved but Weakness Persists The diffusion index for current activity edged higher this month, from -4.5 to 1.9, its first positive reading in three months. The indexes for current new orders and shipments approached zero this month, increasing 7 points and 4 points, respectively. Both indexes remained negative, however, suggesting continued weakness. The survey’s indicators for labor market conditions were mixed this month. The percentage of firms reporting increases in employment (14 percent) was slightly greater than the percentage reporting decreases (11 percent). The employment index increased 4 points, from -1.7 to 2.6. Firms, however, reported overall declines in average work hours in November. The workweek index registered its second consecutive negative reading and declined 9 points. Manufactured Goods Prices Are Steady The surveyed firms reported near-steady prices for their own manufactured goods this month. Most firms (70 percent) reported no changes in prices received, while the percentage of firms reporting lower prices (14 percent) was slightly greater than the percentage reporting higher prices (13 percent). Firms reported, on balance, declines in input prices. The percentage of firms reporting lower input prices (19 percent) was slightly greater than the percentage reporting higher input prices (14 percent). The current prices paid index remained negative for the second consecutive month. Future Indexes Improve and Still Reflect Optimism The diffusion index for future general activity increased from a reading of 36.7 in October to 43.4 this month. The percentage of firms expecting increases over the next six months (50 percent) remains significantly greater than the percentage of firms expecting decreases (7 percent). The index still remains below its reading from one year ago. Future indexes for new orders and shipments also showed notable improvement this month, increasing 10 points and 7 points, respectively. In addition, firms marked up their forecasts for employment increases. The future employment diffusion index increased 14 points to its highest reading since last November. Thirty-three percent of the firms expect increases in employment over the next six months, up from 25 percent in October. Firms Expect Their Own Price Increases to Remain Below the Rate of Inflation In this month’s special questions, firms were asked to forecast the changes in prices of their own products over the next four quarters. The median forecast was for an increase in their own prices of 1 percent, a rate of increase lower than the rate of inflation expected to be faced by the workers they employ regionally (2 percent) and lower than the rate of inflation expected for the average U.S. consumer (2 percent). Firms expect their own per employee compensation costs (wages plus benefits) to rise by 3 percent over the next four quarters. When asked about the average rate of inflation for consumers over the next 10 years, the firms’ median forecast was 2.5 percent. Summary Regional manufacturers reported slight improvement in the general level of activity in November. Indexes for new orders, shipments, and average work hours, however, continued to suggest weakness. Firms reported slightly improved employment and near-steady manufactured goods prices this month, on balance. The firms’ future expectations showed notable improvement, with only a small percentage of firms expecting declines in activity over the next six months. One-third of the surveyed firms expect employment gains over the next six months. Special Questions (November 2015) For the period 2015:Q4 to 2016:Q4, please list your expected annual percent change with respect to the following: Percent Change* 1. For Your Firm: Prices your firm will receive (for its own goods and services sold). 1.0 Compensation your firm will pay per employee (for wages and benefits). 3.0 2. For your employees: Prices your employees will pay (for goods and services where they live). 2.0 3. For U.S. Consumers: Prices U.S. consumers will pay (for goods and services). 2.0 For the next 10 years (2015 through 2024), what is your expected annual average percent change with respect to the following: Percent Change* 4. For U.S. Consumers: Prices U.S. consumers will pay (for goods and services). 2.5 *Figures represent median forecasts. At least 62 of the 76 firms responding to the survey also responded to the special questions. Summary of Returns November 2015 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 Business -4.5 24.7 51.9 22.8 1.9 36.7 50.4 30.9 7.0 43.4 Conditions New Orders -10.6 25.8 42.9 29.5 -3.7 38.9 57.3 26.7 8.5 48.8 Shipments -6.1 22.0 49.6 24.5 -2.5 37.1 53.5 30.3 9.6 43.9 Unfilled Orders -11.7 18.3 65.7 16.0 2.4 8.1 28.0 59.3 12.5 15.5 Delivery Times -1.2 5.4 89.7 4.9 0.5 -4.2 11.6 71.6 10.0 1.6 Inventories -17.4 16.5 58.2 24.4 -7.9 -5.1 23.5 45.2 22.3 1.2 Prices Paid -0.1 14.1 64.8 19.0 -4.9 17.0 33.7 47.0 13.0 20.7 Prices Received 1.3 13.2 69.6 13.6 -0.4 10.6 19.4 65.0 8.9 10.6 Number of Emp. -1.7 13.6 75.4 11.0 2.6 14.0 33.4 56.8 5.2 28.2 Avg. Emp. Wrkwk. -7.3 7.7 62.1 23.9 -16.2 0.5 27.0 58.5 10.5 16.6 Capital Ex. -- -- -- -- -- 7.2 38.8 45.3 12.9 25.9 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 November 16, 2015. October 2015 Manufacturing conditions in the region continued to weaken in October, according to firms responding to this month’s Manufacturing Business Outlook Survey. The indicator for general activity remained negative, while the new orders and shipments indexes turned negative this month. Labor market indicators also weakened. The survey’s indicators for prices of inputs and for firms’ own products suggest near-steady prices this month. Although the survey’s future indicators decreased this month, a minority of firms expect a continued downturn in business activity over the next six months. Indicators Are Weaker in October The diffusion index for current activity remained negative for the second consecutive month, although it edged slightly higher from -6.0 in September to -4.5. The indexes for current new orders and shipments showed notable deterioration this month, with both indexes falling below zero, marking the first negative reading for the new orders index since May 2013. Indicators for delivery times and unfilled orders were also negative. Thirty percent of the firms reported a decline in inventories this month, and the current inventories index declined 15 points. The survey’s indicators for labor market conditions suggest slightly weaker employment. The percentage of firms reporting declines in employment (15 percent) was slightly greater than the percentage reporting increases (13 percent). The employment index declined nearly 12 points, from 10.2 to -1.7. Firms also reported overall declines in average work hours in October, and the workweek index was negative for the first time since May. Prices Are Steady The surveyed firms reported near-steady prices for inputs and their own manufactured goods this month. With respect to prices of purchased inputs, the percentage of firms reporting lower prices was offset by the percentage reporting higher prices (19 percent). Most firms (60 percent) reported steady input prices. Nearly 70 percent of the firms reported steady prices received for manufactured goods. The percentage of firms reporting higher prices (14 percent) was only slightly greater than the percentage reporting lower prices (13 percent). The prices received index has suggested little, if any, upward price pressure since the beginning of the year. Future Indexes Fall Back but Still Reflect Optimism The diffusion index for future general activity fell from a reading of 44.0 in September to 36.7 this month. The percentage of firms expecting increases over the next six months (53 percent) remains significantly greater than the percentage expecting decreases (16 percent). The index, while generally positive, remains below its reading from one year ago. Future indexes for new orders and shipments showed a modest decrease this month, but the majority of firms expect increases over the next six months. Firms also marked down their forecast for employment increases. The future employment diffusion index fell 4 points. The percentage of firms expecting employment increases (25 percent) still exceeds the percentage expecting decreases (11 percent). Rates of Utilization Suggest Continued Slack For this month’s special questions, manufacturers were asked about current capacity utilization rates compared with the same time last year. The average capacity utilization rate among the firms polled was 76 percent, very near the current rate estimated for the U.S. manufacturing sector. Polled firms indicated, however, that the current rate was slightly lower than that from one year earlier (77 percent). For the U.S., the capacity utilization rate for the manufacturing sector, overall, is estimated to be near the same as it was one year ago. Firms were also asked about their plans for different categories of capital spending next year. The share of firms expecting to increase spending was higher than the share of firms expecting decreases for three of six categories (software, noncomputer equipment, and energy-saving investments). For all capital expenditure categories, higher capacity utilization rates were associated with expected increases in capital spending. For example, the current utilization rate among firms expecting to increase spending on noncomputer equipment (82 percent) was notably higher than those expecting to decrease spending (69 percent). Summary For the second consecutive month, regional manufacturers reported declines in overall activity. Indexes for new orders, shipments, employment, and average work hours all dipped into negative territory this month. On balance, firms reported near-steady prices. Despite the reported deterioration in current conditions, most firms continued to expect growth over the next six months, although the levels of optimism as suggested by the survey’s future indexes weakened across all broad indicators this month. Special Questions (October 2015) 1. Which of the following best characterizes your plant’s percentage capacity utilization (current and last year’s)? Capacity Utilization* Current Same Time Last Year (% of reporters) (% of reporters) Less than 60% 10.0 7.1 60%-70% 27.1 11.4 70%-80% 25.7 38.7 80%-90% 20.0 35.7 Greater than 90% 17.2 7.1 Average utilization rate 76.0 77.4 U.S. utilization rate** 76.6 76.6 2. Do you expect the following capital expenditure categories over the next year (2016) to be higher than, the same, or lower than in the current year? Higher Same Lower Diffusion (% of (% of (% of Index reporters) reporters) reporters) Software 31.9 49.3 18.8 13.0 Noncomputer equipment 34.8 40.6 24.6 10.1 Energy-saving investments 11.6 72.5 10.1 1.4 Computer and related hardware 20.3 59.4 21.7 -1.4 Structure 18.8 50.7 27.5 -8.7 Other 2.9 30.4 11.6 -8.7 Exhibit 1: Average percent capacity utilization rates for firms in categories above. Capacity Capacity Capacity Utilization Utilization Utilization Rate for Rate for Rate for Higher Spending Same Spending Lower Spending in Category in Category in Category Software 79.5 77.4 70.2 Noncomputer equipment 81.6 77.3 68.7 Energy-saving investments 83.9 77.3 65.0 Computer and related hardware 77.1 78.3 71.2 Structure 84.8 76.7 70.3 Average 81.4 77.4 69.1 *Firms provided more specific rates of utilization than shown in the provided ranges. **Capacity Utilization: U.S. Manufacturing (NAICS) "Current" indicates rate for August 2015; "Same Time Last Year" indicates rate for October 2014 Source: Federal Reserve Board, Haver Analytics Summary of Returns October 2015 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 Business -6.0 26.4 35.7 30.9 -4.5 44.0 52.9 22.3 16.2 36.7 Conditions New Orders 9.4 25.4 33.7 36.0 -10.6 44.4 54.0 22.5 15.1 38.9 Shipments 14.8 24.6 42.1 30.7 -6.1 41.4 55.0 16.8 17.9 37.1 Unfilled Orders -6.6 11.9 60.4 23.5 -11.7 12.4 21.7 57.5 13.6 8.1 Delivery Times 0.5 8.7 78.2 9.8 -1.2 2.2 10.9 65.1 15.2 -4.2 Inventories -2.7 13.0 54.3 30.4 -17.4 3.9 23.2 38.9 28.3 -5.1 Prices Paid 0.5 18.9 59.9 19.0 -0.1 29.2 27.9 51.8 10.9 17.0 Prices Received -5.0 14.0 69.5 12.7 1.3 6.2 19.5 64.0 8.9 10.6 Number of Emp. 10.2 13.4 68.7 15.0 -1.7 17.9 25.4 53.1 11.4 14.0 Avg. Emp. Wrkwk. 7.0 9.6 70.9 16.9 -7.3 5.0 16.3 57.4 15.8 0.5 Capital Ex. -- -- -- -- -- 27.2 23.7 49.5 16.5 7.2 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 October 13, 2015. September 2015 Manufacturing conditions in the region were mixed in September, according to firms responding to this month’s Manufacturing Business Outlook Survey. The indicator for general activity fell into negative territory, but indicators for new orders, shipments, and employment remained positive. Evidence suggests that the responses regarding general activity that were received earlier in the month may have been negatively affected by the volatility in the stock market and international news reports. Firms reported essentially unchanged prices for raw materials and other inputs in September and slight declines in prices for their own products. The survey’s indicators of future activity remained near their readings in August, indicating that firms expect a continuation of growth in the manufacturing sector over the next six months. Indicators Were Mixed in September The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 8.3 in August to -6.0 this month. This is the first negative reading in the index since February 2014 (see Chart). However, the demand for manufactured goods, as measured by the survey’s current new orders index, showed continued growth: The diffusion index increased from 5.8 to 9.4. Firms reported that shipments also continued to rise. The current shipments index remained positive but fell 2 points, to 14.8. Firms’ responses suggest some improvement in employment conditions in September despite the reported lull in overall activity. The percentage of firms reporting an increase in employees in September (21 percent) was higher than the percentage reporting a decrease (11 percent). The current employment index increased 5 points, its highest reading in five months. Firms also reported, on balance, a modest increase in the workweek similar to August. Prices Near Steady This Month Firms reported near-steady prices of purchased inputs this month. The percentage of firms reporting price increases (16 percent) was nearly offset by the percent reporting price reductions (15 percent). Roughly two-thirds of the firms reported steady input prices this month. The prices paid diffusion index fell 6 points, to 0.5, its lowest reading in four months. With respect to prices received for manufactured goods, the percent of firms reporting lower prices (17 percent) exceeded the percentage reporting higher prices (12 percent) for the second consecutive month. The prices received index was virtually unchanged from August at -5.0. Future Indexes Remained Generally Optimistic The survey’s broadest indicator of future growth edged slightly higher this month. The future general activity index increased 1 point, to 44.0, its highest reading since January (see Chart). The future index for new orders, at 44.4, decreased 2 points, while the future shipments index, at 41.4, increased 4 points. Furthermore, 28 percent of the firms expect expansion in their workforce over the next six months, while 10 percent expect a reduction. The future employment index, at 17.9, declined 4 points from its August reading. In this month’s special questions, firms were asked to estimate their total production growth for the third quarter ending this month along with expected growth for the fourth quarter. Firms anticipating increases in third-quarter production (46 percent) edged out those anticipating decreases (42 percent). However, the median production growth expected by firms for the third quarter was essentially unchanged from the second quarter. With regard to the fourth quarter, the percentage of firms forecasting acceleration in the rate of production growth (41 percent) was only slightly greater than the percentage forecasting deceleration in growth (39 percent). Summary The Manufacturing Business Outlook Survey suggests diminished general activity in September, although firms reported continued moderate growth in new orders and shipments. Employment also expanded moderately, suggesting firms are optimistic about a continuation of growth despite reported weakness in overall activity this month. The survey’s price indexes showed no signs of upward pressures this month. Indicators reflecting firms’ expectations for the next six months held steady or improved, suggesting expectations have not been notably diminished compared with previous months. Special Questions (September 2015)* 1. How will your firm's total production for the third quarter compare with that of the second quarter? An Increase of: % of firms Subtotals 10% or more 5.4% 8–10% 5.4% 6–8% 5.4% 4–6% 9.5% 2–4% 6.8% 1–2% 8.1% Less than 1% 5.4% Subtotal 45.9% No change 12.2% A decline of: Less than 1% 1.4% 1–2% 6.8% 2–4% 4.1% 4–6% 6.8% 6–8% 5.4% 8–10% 4.1% 10% or more 13.5% Subtotal 41.9% The median value for all responses is “no change.” 2. For the upcoming fourth quarter, how much growth do you expect at your plant compared with the third quarter? % of firms Subtotals Significant acceleration 6.8% Some acceleration 16.2% Slight acceleration 17.6% Subtotal 40.5% No change 20.3% Slight deceleration 18.9% Some deceleration 17.6% Significant deceleration 2.7% Subtotal 39.2% *Percentages might not add up to 100 due to rounding. Summary of Returns September 2015 September vs. August Six Months from Now vs. September Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 8.3 28.8 36.4 34.8 -6.0 43.1 53.5 27.5 9.5 44.0 Conditions New Orders 5.8 40.8 25.5 31.4 9.4 46.4 55.2 29.3 10.7 44.4 Shipments 16.7 40.0 28.2 25.2 14.8 37.6 50.9 30.3 9.6 41.4 Unfilled Orders -1.0 15.1 55.1 21.7 -6.6 26.2 21.7 60.3 9.2 12.4 Delivery Times -0.4 12.6 72.9 12.1 0.5 1.0 15.6 64.9 13.4 2.2 Inventories 0.2 20.8 49.3 23.5 -2.7 12.4 23.4 48.2 19.5 3.9 Prices Paid 6.2 15.8 66.0 15.4 0.5 38.4 33.1 50.6 3.9 29.2 Prices Received -4.9 11.5 63.8 16.5 -5.0 8.7 19.9 55.1 13.7 6.2 Number of Emp. 5.3 21.2 63.7 11.0 10.2 21.5 27.7 53.5 9.8 17.9 Avg. Emp. Wrkwk. 8.5 18.4 66.1 11.5 7.0 1.2 15.2 63.4 10.2 5.0 Capital Ex. -- -- -- -- -- 18.4 33.7 44.7 6.5 27.2 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 September 14, 2015. August 2015 Manufacturing activity in the region increased in August, according to firms responding to this month’s Manufacturing Business Outlook Survey. The indicators for general activity are holding fairly steady and suggest modest growth. While firms reported increased shipments compared with the prior month, the current indicators for new orders and employment suggest steady conditions. The survey’s indicators of future activity predict a continuation of growth in the region’s manufacturing sector over the next six months. Firms Report Slight Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 5.7 in July to 8.3 in August. This index has hovered in a low range since the beginning of the current year, far below the highs of late 2014. The demand for manufactured goods, as measured by the survey’s current new orders index, remains low as well, falling slightly more than 1 point to 5.8 in August. However, the current shipments index rebounded 12 points to 16.7. Firms’ responses suggest steady conditions in the regional labor market. The percentage of firms reporting an increase in employees in August (21 percent) exceeded the percentage reporting a decrease (16 percent), and the corresponding diffusion index for current employment increased 6 points, to 5.3. Firms reported modest increases in the workweek: The percentage of firms reporting a longer workweek (16 percent) was greater than the percentage reporting a shorter workweek (7 percent). Firms Report Minor Price Changes Input price pressures were subdued: The prices paid index fell 14 points, to 6.2. Although 78 percent of the firms reported that input prices were unchanged, the percentage of firms reporting price increases (13 percent) exceeded those reporting reductions (7 percent). With respect to prices received for manufactured goods, a majority of firms (81 percent) reported no change in prices. The percentage of firms reporting reductions in prices received (11 percent) exceeded those reporting increases in prices received (6 percent) for the first time in three months. Manufacturers Expect Growth over the Next Six Months The diffusion index for future activity increased from 41.5 in July to 43.1 this month and remains well entrenched as an indicator of continued growth. The future index for new orders was virtually unchanged at 46.4, while the future shipments index decreased 12 points to 37.6. The future employment index held relatively steady at 21.5. Most firms (over 61 percent) are expecting no change in their employment levels over the next six months. Export Shares Are Lower In this month’s special questions, firms were asked about the growth of exports as a percentage of their total sales over the past year. The firms reporting decreases (23 percent) outnumbered those reporting increases (19 percent), producing a diffusion index of -4.2. The last time this question was asked (slightly more than one year ago), the share of firms reporting increases was much higher than the share reporting decreases (39 percent versus 7 percent), which resulted in a diffusion index of 31.6. Firms were also asked about the type of products they were exporting: Intermediate products held the largest share at 35 percent, followed by final business products at 23 percent and capital goods at 21 percent. Summary The Manufacturing Business Outlook Survey suggests a continuation of modest expansion of the region’s manufacturing sector. The indicators for general activity and new orders and shipments remain positive, and firms reported a slight increase in employment in August. Price pressures for inputs are subdued, and although more firms reported price decreases for their own products than reported price increases, a strong majority reported steady prices received. The indicators reflecting firms’ expectations about regional business conditions for the next six months were almost unchanged and remain strong. The responding firms also predict future employment growth. Special Questions (August 2015) 1. Over the past year, exports as a share of your total sales have: July 2014 August 2015 Increased substantially 1.8% 6.3% Increased modestly 36.8% 12.5% Remained unchanged 54.4% 58.2% Decreased modestly 7.0% 16.7% Decreased substantially 0.0% 6.3% Diffusion Index 31.6 -4.2 2. Which one of the following categories best characterizes the type of products being exported? July 2014 August 2015 Final consumer products 11.3% 11.6% Final business products 24.5% 23.3% Intermediate products 39.6% 34.9% Capital goods 18.9% 20.9% Other 5.7% 9.3% Summary of Returns August 2015 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 Business 5.7 30.1 46.9 21.9 8.3 41.5 55.0 30.4 11.9 43.1 Conditions New Orders 7.1 31.7 42.3 25.9 5.8 46.3 58.1 25.8 11.6 46.4 Shipments 4.4 36.0 43.3 19.3 16.7 49.7 54.1 29.3 16.6 37.6 Unfilled Orders -6.3 13.6 68.2 14.6 -1.0 33.6 32.0 59.3 5.8 26.2 Delivery Times -4.5 11.5 76.7 11.9 -0.4 10.3 10.6 76.3 9.6 1.0 Inventories -5.7 19.1 62.0 18.9 0.2 -1.3 30.3 49.7 17.9 12.4 Prices Paid 20.2 13.4 77.8 7.2 6.2 37.3 38.4 58.7 0.0 38.4 Prices Received 1.7 6.1 81.2 11.0 -4.9 20.2 19.1 66.1 10.4 8.7 Number of Emp. -0.4 21.1 63.1 15.8 5.3 22.2 30.0 61.5 8.5 21.5 Avg. Emp. Wrkwk. 4.0 15.9 75.4 7.3 8.5 12.7 16.9 60.0 15.7 1.2 Capital Ex. -- -- -- -- -- 7.7 28.6 55.6 10.1 18.4 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 August 17, 2015. July 2015 Manufacturing activity in the region increased modestly in July, according to firms responding to this month’s Manufacturing Business Outlook Survey. Indicators for general activity, new orders, and shipments remained positive, although they declined from their readings in June. Employment was essentially flat at the reporting firms this month. Firms reported higher prices for raw materials and other inputs in July, but prices of manufactured goods were reported as mostly steady. The survey’s index of future activity improved slightly, however, indicating that firms expect continuing growth in the manufacturing sector over the next six months. Indicators Suggest Modest Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 15.2 in June to 5.7 this month. With the exception of June’s reading, the diffusion index has remained in the single-digit range since the beginning of this year. The demand for manufactured goods, as measured by the survey’s current new orders index, also expanded modestly. The new orders index remained positive but fell 8 points. The current shipments index decreased 10 points from its six-month high reading in June. Both unfilled orders and delivery time indexes were negative this month, suggesting a decline in the backlog of orders and faster delivery times. Firms’ responses suggest steady employment in July. The percentage of firms reporting an increase in employees in July was equal to the percentage reporting a decrease (12 percent). The current employment index fell for the third consecutive month, from a reading of 3.8 in June to -0.4. Firms reported a modest overall increase in the workweek: The workweek index was positive but little changed at 4.0. Firms Continue to Report Input Prices Increases Over 25 percent of the firms reported higher input prices this month, up from the 21 percent that reported higher prices last month. The prices paid index has increased for two consecutive months and is now at its highest reading since October. With respect to the prices received for their own manufactured goods, the percentage of firms reporting higher prices received (12 percent) narrowly exceeded the percentage reporting lower prices (10 percent), although 77 percent reported steady prices. The prices received index fell slightly from 4.8 to 1.7. Future Indexes Show Continued Improvement Most of the survey’s broad indicators of future growth edged slightly higher this month. The future general activity index increased 2 points to its highest reading since January. The future index for new orders increased 1 point, while the future shipments index fell 6 points, after reaching a 10-month high in June. The future employment index was essentially unchanged compared with last month. More than 31 percent of the firms expect expansion in their workforce over the next six months, while 9 percent expect a reduction. Significant Share Cite Seasonal Factors in Monthly Production Change In this month’s special questions, firms were asked to assess the importance of seasonal factors in monthly production, seasonal changes in their production by month, and whether these seasonal factors have changed in importance over time. Firms reported seasonal increases in production in the spring and during the fall as well as a decrease in activity in mid-summer and during the winter months. Summary The Manufacturing Business Outlook Survey suggests modest expansion of the region’s manufacturing sector in July. The survey’s indicators for general activity, new orders, and shipments all remained positive but moderated from their readings in June. Firms reported near-steady employment this month. A notable share of respondents reported higher prices of inputs again this month. For their own manufactured products, firms reported that prices were steady this month. Indicators reflecting firms’ expectations for the next six months showed some improvement. Special Questions (July 2015) 1. How important are seasonal factors in your monthly production levels? 2015 2013 Significant 37.5% 45.0% Not significant 59.7% 55.0% No response 2.8% 0.0% 2. During what months does your firm experience seasonal increases or decreases? Month Increases Decreases Net January 13.2% 38.2% -25.0% February 14.5% 27.6% -13.2% March 28.9% 3.9% 25.0% April 31.6% 0.0% 31.6% May 30.3% 5.3% 25.0% June 23.7% 14.5% 9.2% July 14.5% 34.2% -19.7% August 23.7% 14.5% 9.2% September 28.9% 5.3% 23.7% October 39.5% 6.6% 32.9% November 17.1% 25.0% -7.9% December 7.9% 39.5% -31.6% 3. Have seasonal factors become more or less important for your business over time? 2015 2012 More important 13.9% 12.3% Less important 19.4% 19.8% No difference over time 56.9% 61.7% No response 9.7% 6.2% Summary of Returns July 2015 July vs. June Six Months from Now vs. July Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 15.2 26.8 51.2 21.2 5.7 39.7 50.0 35.0 8.6 41.5 Conditions New Orders 15.2 31.7 40.8 24.7 7.1 44.9 53.0 34.6 6.6 46.3 Shipments 14.3 23.5 56.5 19.1 4.4 55.8 56.6 30.4 6.9 49.7 Unfilled Orders 3.7 11.6 68.5 17.9 -6.3 23.4 36.0 53.6 2.4 33.6 Delivery Times -4.6 8.3 77.0 12.8 -4.5 21.1 14.7 70.8 4.5 10.3 Inventories 3.1 15.8 60.0 21.5 -5.7 11.3 18.9 47.5 20.2 -1.3 Prices Paid 17.2 25.4 69.5 5.2 20.2 46.3 39.5 54.5 2.2 37.3 Prices Received 4.8 12.0 76.5 10.2 1.7 12.8 24.5 65.6 4.3 20.2 Number of Emp. 3.8 12.0 75.0 12.4 -0.4 22.3 31.3 56.9 9.1 22.2 Avg. Emp. Wrkwk. 4.7 14.2 71.5 10.3 4.0 26.1 21.4 64.5 8.7 12.7 Capital Ex. -- -- -- -- -- 8.1 24.1 52.8 16.4 7.7 Notes: (1) Items may not add to 100 percent because of omission by respondents. (2) All data are seasonally adjusted. (3) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (4) Survey data reflect information received through July 13, 2015. June 2015 Manufacturing conditions in the region improved in June, according to firms responding to this month’s Manufacturing Business Outlook Survey. Indicators for general activity, new orders, and shipments remained positive and increased over their readings in May. Employment and average work hours increased, on balance, at the reporting firms. Firms reported higher prices for raw materials and other inputs in June compared with reported price decreases in recent months. The survey’s indicators of future activity suggest that firms expect continuing growth in the manufacturing sector over the next six months. Indicators Suggest Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 6.7 in May to 15.2 this month. This is the highest reading for the index since December. The demand for manufactured goods, as measured by the survey’s current new orders index, picked up this month. The new orders index increased 11 points to its highest reading since November. The current shipments index increased 13 points, also the highest reading since November. Firms’ responses suggest modest expansion in employment in June. The percentage of firms reporting an increase in employees in June (22 percent) exceeded the percentage reporting a decrease (18 percent). The current employment index, however, fell nearly 3 points, to 3.8. Firms reported an overall modest increase in the workweek compared with a decrease last month: The workweek index increased from -5.6 to 4.7. More Firms Report Input Prices Increases Over 21 percent of the firms reported higher input prices this month, up significantly from the 5 percent that reported higher prices last month. The prices paid index increased 31 points to its highest reading in 8 months. The prices received index, which reflects firms’ own final goods prices, also increased from -5.4 to 4.8, the first positive reading in six months. The percent of firms reporting higher prices received (14 percent) exceeded the percentage reporting lower prices (10 percent), although 76 percent reported steady prices. Most Future Indexes Move Higher Most of the survey’s broad indicators of future growth showed marked improvement this month. The future general activity index increased 6 points to its highest reading since January. The future index for shipments increased 24 points, while the future new orders index increased 13 points. About 31 percent of the firms expect expansion in their workforce over the next six months, while 9 percent expect a reduction. The future employment index was essentially flat, edging just 1 point higher this month. The future capital expenditures index weakened this month, falling 9 points to its lowest reading since March 2013. Most Firms Expect to Increase Production in the Second Half of 2015 In this month’s special questions, firms were asked to appraise the underlying demand for their products as well as expected production growth for the second half of the year compared with the first half. Firms were also asked to evaluate how production increases would be achieved, by either increases in employment, work hours, or productivity gains. Summary The Manufacturing Business Outlook Survey suggests expansion of the region’s manufacturing sector in June. The survey’s indicators for general activity, new orders, and shipments all improved from their readings in May. Firms reported a modest increase in employment this month. A notable share of respondents reported higher prices of inputs this month. For their own manufactured products, more firms reported price increases than reported price decreases. Indicators reflecting firms’ expectations for the next six months improved this month, most notably for future new orders and shipments. Special Questions 1.) Over the past three months, how would you characterize the underlying demand for your manufactured products? Percentage Increasing significantly 8.1% Increasing modestly 43.2% No Change 18.9% Decreasing modestly 21.6% Decreasing significantly 8.1% 2a.) What change, if any, do you anticipate in your firm's production during the second half of 2015 compared with the first half of the year? Percentage Increase of 5% or more 31.5% Increase of 4-5% 11.0% Increase of 3-4% 6.8% Increase of 2-3% 11.0% Increase of 1-2% 8.2% Increase of less than 1% 2.7% No change 6.8% Decrease of less than 1% 11.0% Decrease of 1-2% 1.4% Decrease of 2-3% 1.4% Decrease of 3-4% 5.5% Decrease of 4-5% 1.4% Decrease of 5% or more 1.4% 2b.) Would this represent an acceleration or deceleration of growth from the first half of 2015? Percentage Significant acceleration 9.7% Some acceleration 47.2% No Change 18.1% Some deceleration 15.3% Significant deceleration 9.7% 3.) If you expect to increase production over the next six months, this will be accomplished by: Percentage Hiring additional workers 33.3% Increasing work hours of current staff, without hiring additional workers 29.6% Increasing productivity of current staff, without hiring additional workers 35.2% Other (please specify) 1.9% Summary of Returns June 2015 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 Business 6.7 29.9 51.9 14.7 15.2 33.9 47.5 35.6 7.8 39.7 Conditions New Orders 4.0 35.0 40.8 19.7 15.2 31.7 51.5 34.1 6.6 44.9 Shipments 1.0 30.3 52.5 16.0 14.3 32.0 58.1 27.7 2.4 55.8 Unfilled Orders -1.1 21.7 60.3 18.0 3.7 15.9 30.7 56.7 7.3 23.4 Delivery Times -3.6 12.2 70.9 16.9 -4.6 5.4 25.0 65.4 3.9 21.1 Inventories -1.8 22.9 53.1 19.8 3.1 -4.0 27.6 46.4 16.3 11.3 Prices Paid -14.2 21.1 70.0 4.0 17.2 20.9 46.3 46.9 0.0 46.3 Prices Received -5.4 14.3 76.1 9.5 4.8 19.4 20.7 62.7 7.9 12.8 Number of Emp. 6.7 21.5 58.7 17.7 3.8 21.5 31.3 49.9 9.0 22.3 Avg. Emp. Wrkwk. -5.6 26.2 52.1 21.4 4.7 9.3 28.3 58.7 2.2 26.1 Capital Ex. -- -- -- -- -- 16.8 28.4 42.5 20.3 8.1 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 June 16, 2015. May 2015 Manufacturing activity in the region increased modestly in May, according to firms responding to this month’s Manufacturing Business Outlook Survey. Indicators for general activity, new orders, and shipments were positive but remain at low readings. Employment increased at the reporting firms, but the employment index moderated compared with April. Firms reported continued price reductions in May, with indicators for prices of inputs and the firms’ own products remaining negative. The survey’s indicators of future activity suggest that firms expect continuing growth in the manufacturing sector over the next six months. Indicators Suggest Slight Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 7.5 in April to 6.7 in May. The index has remained in a single-digit range for the first five months of this year (see Chart 1). The demand for manufactured goods, as measured by the survey’s current new orders index, edged 3 points higher this month, with less than one-third of the firms reporting higher new orders in May compared with April. The current shipments index also increased 3 points to a reading of 1. Firms’ responses suggest some weakening in labor market conditions this month compared with April. The percentage of firms reporting an increase in employees in May (19 percent) exceeded the percentage reporting a decrease (13 percent). The current employment index, however, fell 5 points, to 6.7. Firms reported an overall modest decrease in the workweek: The percentage of firms reporting a shorter workweek (25 percent) was greater than the percentage reporting a longer workweek (19 percent). Notable Share of Firms Report Price Reductions Input prices continued to fall for many of the reporting manufacturers: The prices paid index fell 7 points, to -14.2, its third consecutive negative reading and seventh consecutive monthly decline in the diffusion index (see Chart 2). Although 75 percent of the firms reported that input prices were unchanged, the percentage of firms reporting price reductions (19 percent) exceeded the percentage reporting price increases (5 percent). With respect to prices received for manufactured goods, the largest percentage of firms (76 percent) reported no change in prices. The percentage of firms reporting price reductions for their own products (15 percent) exceeded the percentage reporting price increases (9 percent) for the fifth consecutive month. Future Indexes Remain Below Last Year’s Levels Overall, firms remain optimistic about business and employment conditions over the next six months, although not at levels seen for most of last year. The diffusion index for future activity edged down slightly, from 35.5 in April to 33.9 in May, remaining well below the readings in 2014 (see Chart 1). Individual future indicators were little changed. The future index for shipments fell 2 points, while the future new orders index increased 1 point. About 32 percent of the firms expect expansion in their workforce over the next six months, while 11 percent expect a reduction. The future employment index edged slightly higher this month, to 21.5. In this month’s special questions, firms were surveyed about plans for hiring over the next year and about recent trends in compensation and wages. Although more than half of the firms are planning to increase employment over the next year, many firms reported increasing wages to retain and attract qualified workers. Over one-fifth of the firms reported increasing difficulty in filling openings over the past 12 months. Summary The Manufacturing Business Outlook Survey suggests modest expansion of the region’s manufacturing sector in May. The indicators for general activity and new orders both suggest expansion, but at a continued modest pace. Firms reported an increase in employment this month. A notable share of respondents continued to report downward price pressures for inputs. For their own manufactured products, more firms reported price decreases than reported price increases, although the majority reported steady prices. Indicators reflecting firms’ expectations for the next six months were near steady this month, and firms remained optimistic about future employment growth. 1. Do you expect your firm to increase employment, leave employment unchanged, or decrease employment over the next 12 months? Percentage Increase 51.3% Leave unchanged 38.4% Decrease 10.3% 2. In general, do you currently have enough qualified job candidates from which to choose to fill job vacancies? Percentage Yes 25.3% Yes, except for some job categories 22.8% No 34.2% Not seeking new hires 17.7% 3. Which of the following best describes your use of changes in starting wages and/or salaries to attract new hires? Percentage We are raising starting wages and/or salaries for most job categories. 16.5% We are raising starting wages and/or salaries for only selected job categories. 32.9% We are not raising starting wages and/or salaries. 32.9% Not seeking new hires 17.7% 4. Over the past 12 months, has your ability to retain employees become easier, remained unchanged, or become more difficult? Percentage Easier 3.9% Unchanged 74.0% More difficult 22.1% 5. Which of the following best describes your use of changes in wages and salaries to retain existing employees? Percentage We are increasing wages/salaries for most job categories by more than in the past few years. 17.3% We are increasing wages/salaries for only selected job categories by more than in the past few years. 38.7% Neither of the above 44.0% 6. Which of the following best describes how your firm is changing the prices it charges for its products and/or services in response to changes in compensation costs (that is, wages, salaries, and benefits costs)? Percentage Raising prices to fully pass on higher compensation costs 10.5% Raising prices to partially pass on higher compensation costs 22.4% Not changing prices in response to higher compensation costs 51.3% Lowering prices to fully pass on lower compensation costs 0.0% Lowering prices to partially pass on lower compensation costs 0.0% Not changing prices in response to lower compensation costs 1.3% None of the above 14.5% Summary of Returns May 2015 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 Business 7.5 27.0 50.3 20.3 6.7 35.5 48.8 26.2 14.9 33.9 Conditions New Orders 0.7 31.4 41.2 27.4 4.0 30.8 45.4 28.7 13.8 31.7 Shipments -1.8 29.6 41.9 28.5 1.0 34.0 45.1 28.3 13.1 32.0 Unfilled Orders -7.1 21.9 55.1 23.0 -1.1 16.6 24.8 52.4 8.9 15.9 Delivery Times 0.5 11.8 70.0 15.4 -3.6 -0.2 13.4 65.7 8.0 5.4 Inventories 1.5 19.1 59.0 20.9 -1.8 -5.4 17.9 46.8 21.9 -4.0 Prices Paid -7.5 4.8 74.6 19.1 -14.2 19.9 24.0 56.9 3.1 20.9 Prices Received -4.1 9.1 76.2 14.5 -5.4 10.7 24.8 54.8 5.4 19.4 Number of Emp. 11.5 19.4 67.9 12.7 6.7 20.6 32.1 45.4 10.5 21.5 Avg. Emp. Wrkwk. 3.4 19.2 55.3 24.8 -5.6 2.4 18.7 58.6 9.4 9.3 Capital Ex. -- -- -- -- -- 15.8 25.9 50.6 9.1 16.8 Notes: (1) Items may not add to 100 percent because of omission by respondents. (2) All data are seasonally adjusted. (3) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (4) Survey data reflect information received through May 19, 2015. April 2015 Manufacturing activity in the region increased modestly in April, according to firms responding to this month’s Manufacturing Business Outlook Survey. Indicators for general activity and new orders were positive but remained at low readings. Firms reported overall declines in shipments this month, but employment and work hours increased at the reporting firms. Firms reported continued price reductions in April, with indicators for prices of inputs and the firms’ own products remaining negative. The survey’s indicators of future activity suggest a continuation of modest growth in the manufacturing sector over the next six months. Indicators Suggest Slight Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 5.0 in March to 7.5 this month. The index has hovered in a single-digit range for the first four months of this year (see Chart 1). The demand for manufactured goods, as measured by the survey’s current new orders index, was virtually flat this month. The index was only slightly positive and fell 3 points from its reading in March. The current shipments index rebounded 6 points but remained negative for the second consecutive month. Firms’ responses suggest some improvement in labor market conditions compared with March. The current employment index increased 8 points, to 11.5, its highest reading in five months. The percentage of firms reporting an increase in employees in April (21 percent) exceeded the percentage reporting a decrease (9 percent). Firms reported modest increases in the workweek: The percentage of firms reporting a longer workweek (14 percent) was greater than the percentage reporting a shorter workweek (10 percent) for the first time in four months. Some Firms Report Price Reductions Input price pressures continued to moderate for reporting manufacturers: The prices paid index fell 5 points, to -7.5, its second consecutive negative reading and lowest reading since June 2009 (see Chart 2). Although 77 percent of the firms reported that input prices were unchanged, the percentage of firms reporting price reductions (14 percent) exceeded those reporting increases (6 percent). With respect to prices received for manufactured goods, the largest percentage of firms (80 percent) reported no change in prices. The percentage of firms reporting price reductions (11 percent) exceeded those reporting price increases (7 percent) for the fourth consecutive month. Manufacturers Expect Growth over the Next Six Months The diffusion index for future activity increased from 32.0 in March to 35.5 this month but remained well below the readings over the past year (see Chart 1). The future indexes for new orders fell 4 points, while the future shipments index increased 2 points. The future employment index showed some improvement this month, increasing 6 points. Although nearly 53 percent of the firms are expecting no change in their employment levels over the next six months, the percentage expecting increases in employment rose from 25 percent in March to 32 percent this month. In this month’s special questions, firms were surveyed about the effects of the stronger dollar on their manufacturing business. On balance, the stronger dollar since last year is having negative effects on manufacturing, although the largest share of firms characterized the effect as slight, overall. Summary The Manufacturing Business Outlook Survey suggests continued modest expansion of the region’s manufacturing sector in April. The indicators for general activity and new orders both suggest expansion, but at a very modest pace. Firms, however, reported an increase in employment this month. Some respondents continued to report downward price pressures for inputs. For their own manufactured products, more firms reported price decreases than reported price increases, although 80 percent of the firms reported steady prices. Indicators reflecting firms’ expectations for the next six months improved modestly this month, and the firms were notably more optimistic in their forecast for future employment growth. Summary of Returns April 2015 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 Business 5.0 28.0 45.6 20.6 7.5 32.0 44.5 44.4 9.0 35.5 Conditions New Orders 3.9 32.1 36.5 31.4 0.7 34.3 42.3 42.4 11.5 30.8 Shipments -7.8 28.9 39.2 30.7 -1.8 32.3 47.7 35.3 13.8 34.0 Unfilled Orders -13.8 13.7 62.0 20.9 -7.1 8.7 19.4 70.6 2.8 16.6 Delivery Times -13.4 8.3 81.7 7.8 0.5 1.9 10.7 74.8 10.8 -0.2 Inventories -2.3 17.5 66.6 16.0 1.5 -0.6 13.7 61.6 19.1 -5.4 Prices Paid -3.0 6.2 76.5 13.7 -7.5 27.5 22.8 69.8 2.9 19.9 Prices Received -6.4 7.0 79.6 11.1 -4.1 7.4 17.3 69.0 6.6 10.7 Number of Emp. 3.5 20.6 70.3 9.1 11.5 14.4 31.7 52.7 11.1 20.6 Avg. Emp. Wrkwk. -11.4 13.8 71.3 10.3 3.4 -4.2 9.9 80.3 7.5 2.4 Capital Ex. -- -- -- -- -- 16.4 27.0 55.8 11.1 15.8 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 April 14, 2015. March 2015 Manufacturing activity in the region increased at a modest pace in March, according to firms responding to this month’s Manufacturing Business Outlook Survey. The survey’s current indicators for general activity and new orders were positive and remained near their low readings in February. Firms reported overall declines in shipments and in work hours, while overall employment increased only slightly. Firms reported more widespread price reductions in March, although most firms continued to report steady prices. The survey's indicators of future activity showed mixed results but continued to suggest that the manufacturing sector is expected to continue growing over the next six months. Indicators Suggest Modest Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, at 5.0, was virtually unchanged from its reading of 5.2 in February (see Chart 1). The demand for manufactured goods, as measured by the current new orders index, remained at a very low, albeit positive, reading of 3.9 and edged 2 points lower than in February. The current shipments index fell more dramatically (16 points) and returned the index to negative territory (its second negative reading in three months). Firms reported faster delivery times and a decrease in unfilled orders this month compared with February. Firms’ responses suggest weaker labor market conditions compared with most of last year. Although the current employment index, at just 3.5, was virtually unchanged from last month, the index remains well below its average reading of about 14 over the second half of last year. The percentage of firms reporting an increase in employees in March (17 percent) narrowly exceeded the percentage reporting a decrease (14 percent). Firms also reported reductions in the workweek in March: The percentage of firms reporting a shorter workweek (24 percent) was greater than the percentage reporting a longer workweek (13 percent). Share of Firms Reporting Price Reductions Has Increased Input price pressures continued to moderate for reporting manufacturers: The prices paid index fell 8 points to -3.0 in March, its first negative reading since the summer of 2009 (see Chart 2). Although most firms (68 percent) reported that input prices were unchanged, the percentage of firms reporting price reductions (17 percent) exceeded those reporting increases (14 percent). With respect to prices received for manufactured goods, the percentage of firms reporting price reductions (17 percent) exceeded those reporting price increases (10 percent). The prices received index fell 6 points to -6.4, its third consecutive negative reading. The largest percentage of firms (71 percent) reported no change in manufactured goods prices. Most Future Indicators Remain Positive but Are at Lower Levels Than Last Year The diffusion index for future activity edged up from 29.7 to 32.0 but remained lower than readings over the past year (see Chart 1). The future indexes for new orders and shipments, however, moved in the opposite direction, falling 9 points and 6 points, respectively. The future employment index also was weaker this month. The future employment index decreased 12 points, to its lowest reading since April 2013. Although nearly 57 percent of the firms are expecting no change in their employment levels over the next six months, the percentage expecting increases in employment (25 percent) remained greater than the percentage expecting decreases (11 percent). In this month’s special questions, firms were surveyed about capital spending plans for 2015 compared with actual levels in 2014. These questions were asked for the last four years. Summary The Manufacturing Business Outlook Survey suggests continued modest expansion of the region’s manufacturing sector in March. The indicators for general activity and new orders both continued to suggest modest growth. Firms reported an overall reduction in shipments and average labor hours for March. Respondents also indicated that downward price pressures continued for inputs. Also, for their own products, more firms reported price decreases than reported price increases. Firms remain optimistic about increases in overall business and employment over the next six months, although optimism was less widespread than just a few months ago. Special Questions (March 2015) 1. Do you expect total capital spending in 2015 to be lower than, the same, or higher than last year? Lower Same Higher Diffusion Index (Higher-Lower) Total Capital Spending February 2012 24.4% 37.2% 38.5% 14.1% March 2013 31.8% 28.8% 39.4% 7.6% March 2014 22.7% 25.8% 51.5% 28.8% March 2015 28.4% 28.4% 43.3% 14.9% 2. Do you expect the following capital expenditure categories in 2015 to be lower than, the same, or higher than last year? Lower Same Higher Diffusion Index (Higher-Lower) Software February 2012 15.0% 53.8% 31.3% 16.3% March 2013 30.3% 47.0% 22.7% -7.6% March 2014 20.6% 44.1% 35.3% 14.7% March 2015 21.5% 46.2% 32.3% 10.8% Computers and related hardware February 2012 19.0% 55.7% 25.3% 6.3% March 2013 24.2% 59.1% 16.7% -7.6% March 2014 16.2% 54.4% 29.4% 13.2% March 2015 22.7% 47.0% 30.3% 7.6% Noncomputer equipment February 2012 25.9% 40.7% 33.3% 7.4% March 2013 27.3% 33.3% 39.4% 12.1% March 2014 20.6% 41.2% 38.2% 17.6% March 2015 25.4% 38.8% 35.8% 10.4% Energy-saving investments February 2012 15.6% 64.9% 19.5% 3.9% March 2013 27.3% 62.1% 9.1% -18.2% March 2014 10.6% 75.8% 13.6% 3.0% March 2015 24.1% 62.1% 13.8% -10.3% Structures February 2012 19.0% 67.1% 13.9% -5.1% March 2013 31.8% 53.0% 13.6% -18.2% March 2014 19.1% 55.9% 25.0% 5.9% March 2015 35.0% 48.3% 16.7% -18.3% 3. Which major factors are behind your plans to increase capital spending?* Feb 2012 Mar 2013 Mar 2014 Mar 2015 Expected growth of sales is high 58.8% 43.8% 50.0% 45.7% Need to replace other capital goods 47.1% 34.4% 47.1% 51.4% Need to replace information technology equipment 50.0% 31.3% 41.2% 48.6% Capacity utilization is currently high 32.4% 28.1% 38.2% 25.7% * The sum of percentages may be greater than 100 due to firms indicating more than one factor if applicable. Shown are the top four factors cited. Summary of Returns March 2015 March vs. February Six Months from Now vs. March Prev. Prev. Diff.Inc. No chDec. Diff. Diff.Inc. No chDec. Diff. Index Index Index Index General Business 5.2 27.2 47.7 22.2 5.0 29.7 42.5 37.9 10.5 32.0 Conditions New Orders 5.4 29.8 44.4 25.9 3.9 42.8 47.1 30.9 12.8 34.3 Shipments 8.1 24.6 43.0 32.4 -7.8 38.2 47.9 30.0 15.7 32.3 Unfilled Orders 7.3 9.5 63.7 23.3 -13.8 7.9 19.6 58.2 11.0 8.7 Delivery Times -4.6 7.7 68.0 21.1 -13.4 -0.2 13.0 64.3 11.1 1.9 Inventories 15.2 19.5 53.5 21.8 -2.3 0.0 14.0 56.4 14.6 -0.6 Prices Paid 4.7 14.2 67.7 17.3 -3.0 32.2 31.1 56.4 3.7 27.5 Prices Received -0.2 10.2 71.3 16.5 -6.4 19.3 20.0 59.4 12.6 7.4 Number of Emp. 3.9 17.2 67.1 13.8 3.5 26.8 25.1 56.6 10.7 14.4 Avg. Emp. Wrkwk. -6.0 12.5 59.8 23.9 -11.4 14.1 7.9 68.1 12.2 -4.2 Capital Ex. -- -- -- -- -- 20.9 32.4 44.7 16.0 16.4 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 March 17, 2015. February 2015 Firms responding to the Manufacturing Business Outlook Survey indicated continued modest growth in the region’s manufacturing sector in February. Although the current activity index fell for the third consecutive month, it remained positive, and the employment indicator increased from its reading last month. The survey’s future activity index also fell but continues to reflect general optimism about manufacturing growth in the region over the next six months. Indicators Reflect Modest Growth The diffusion index for current general activity fell slightly, from a reading of 6.3 in January to 5.2 this month. Half of the responding firms indicated there was no change in activity from January to February. The current new orders index fell 3 points, but the shipments and unfilled orders indexes turned positive and rose 15 and 16 points, respectively. The index for delivery times increased 6 points but remained negative, while the index for inventories rose 16 points. The survey’s indicators for current labor market conditions suggest a slight improvement this month, as the employment index increased 6 points and returned to a positive reading. The percentage of firms reporting increases in employment (21 percent) exceeded the percentage reporting decreases (17 percent). The workweek index was negative with almost no change from last month. Price Indexes Remain Subdued Fifteen percent of the firms reported higher prices paid this month, 5 percentage points below the number that reported higher prices paid last month, and the prices paid index fell 5 points. The prices received index remained unchanged at close to zero. Eighty percent of the firms reported no change in prices received, and the percentage of firms reporting higher prices received was equivalent to the percentage reporting lower prices received (10 percent). Firms Expect Growth to Continue The diffusion index for general future activity fell from a reading of 50.9 in January to 29.7 in February. Forty-two percent of the firms expect activity to grow six months from now. The survey’s indicators of future growth for new orders, shipments, unfilled orders, delivery times, and inventories declined, but future indexes for the number of employees and average workweek showed slight improvement. Thirty-seven percent of the firms are expecting growth in their employment levels over the next six months, compared with 33 percent last month, and the future employment index increased 3 points. Firms Expect to Increase Production to Meet Rising Demand In Special Questions, firms were asked to characterize current demand and production of their manufactured products and make comparisons to the fourth quarter of last year (excluding seasonal effects). Most firms (55 percent) reported an increase in underlying demand, while 20 percent reported a decrease. Fifty-four percent of the firms anticipate increasing production, and 33 percent expect to cut production. Summary Responses to the February Manufacturing Business Outlook Survey suggest continued modest expansion of the region’s manufacturing sector. Firms reported that overall activity continued to rise, and the survey’s future activity indexes remain positive, suggesting continued optimism about manufacturing growth. Firms also remain optimistic about employment increases over the next six months. Special Questions (February 2015) 1. Since the beginning of the year, how would you characterize the underlying demand for your manufactured products? Exclude any purely seasonal effect. Increase significantly 6.7% Increase modestly 48.3% No change 25.0% Decrease modestly 18.3% Decrease significantly 1.7% Total Increase: 55.0% Total Decrease: 20.0% 2. What change, if any, do you anticipate in your firm’s production during the first quarter of 2015 compared with the fourth quarter of last year? Increase of more than 4% 19.7% Increase of 2-4% 23.0% Increase of less than 2% 11.4% No change 13.1% Decrease of less than 2% 9.8% Decrease of 2-4% 9.9% Decrease of more than 4% 13.1% Total Increase: 54.1% Total Decrease: 32.8% Average expected growth for all firms: 0.69% Average expected growth for firms attributing growth to seasonal factors: - 0.96%* Average expected growth for firms attributing growth to changes in conditions: 2.41%* *The calculation is based on responses to a separate question about whether the expected change was due to seasonal factors, change in business conditions, or other factors. 3. Would this represent an acceleration or deceleration from the fourth quarter? Significant acceleration 8.2% Some acceleration 41.0% No change 19.7% Some deceleration 23.0% Significant deceleration 8.1% Acceleration: 49.2% Deceleration: 31.1% Summary of Returns February 2015 February vs. January Six Months from Now vs. February Prev. Prev. Diff. Inc NoCh Dec Diff. Diff. Inc NoCh Dec Diff. Index Index Index Index General Business 6.3 27.7 49.9 22.5 5.2 50.9 42.0 37.0 12.3 29.7 Conditions New Orders 8.5 33.4 37.8 28.0 5.4 44.8 55.5 26.5 12.7 42.8 Shipments -6.9 34.7 38.7 26.6 8.1 40.8 50.6 31.8 12.4 38.2 Unfilled Orders -8.6 22.7 61.9 15.3 7.3 9.7 22.5 56.5 14.6 7.9 Delivery Times -11.0 10.9 73.5 15.5 -4.6 8.1 15.9 61.0 16.1 -0.2 Inventories -0.7 27.5 56.4 12.3 15.2 7.2 21.0 48.7 21.1 0.0 Prices Paid 9.8 14.7 75.3 10.0 4.7 26.0 36.7 55.9 4.5 32.2 Prices Received -0.2 9.7 80.4 9.9 -0.2 20.7 26.0 62.9 6.7 19.3 Number of Emp. -2.0 20.9 55.8 17.0 3.9 24.0 37.0 44.9 10.2 26.8 Avg. Emp. Wrkwk. -6.7 12.8 66.3 18.8 -6.0 13.0 24.6 59.7 10.5 14.1 Capital Ex. -- -- -- -- -- 13.2 29.3 54.0 8.3 20.9 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 February 17, 2015 January 2015 Manufacturing activity in the region increased modestly in January, according to firms responding to this month’s Manufacturing Business Outlook Survey. The survey’s current indicators for general activity and new orders fell from their readings in December, suggesting a slower pace of growth. Firms reported continued moderation in price pressures, attributable to lower energy costs. Overall, firms reported that lower energy prices were having overall net positive effects on manufacturing business. The survey's indicators of future activity show continued optimism about continued growth over the next six months. Indicators Suggest Slower Pace of Growth The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased 18 points, from a revised reading of 24.3 in December to 6.3 this month (see Chart 1).* Demand for manufactured goods, as measured by the current new orders index, decreased 5 points, from a revised reading of 13.6 last month to 8.5 this month. Shipments also fell, with its index falling 22 points to -6.9, its first negative reading since February 2014. Firms reported shorter delivery times and a decrease in unfilled orders this month, on balance. Firms’ responses suggest weaker labor market conditions in January. The percentage of firms reporting a decrease in employees (15 percent) exceeded the percentage reporting an increase (13 percent) for the first time in 19 months. The current employment index fell 10 points, from 8.4 to -2.0. Firms also reported reductions in the workweek: The percentage of firms reporting a shorter workweek (23 percent) was greater than the percentage reporting a longer workweek (16 percent). Firms Report Continued Moderation in Input Prices Input price pressures continued to decline for reporting manufacturers: The prices paid index fell 5 points to 9.8 in January and has now declined 15 points over the past three months (see Chart 2). Most firms (68 percent) reported that input prices were unchanged. With respect to prices received for manufactured goods, nearly the same percentage of firms reported price reductions (8 percent) as reported price increases (8 percent). The prices received index fell 10 points to just below zero, its lowest reading in 21 months. The largest percentage of firms (84 percent) reported no change in manufactured good prices. Most Future Indicators Remain at High Levels The diffusion index for future activity edged up by less than 1 point, to 50.9, in January and has remained near its current level over the past five months (see Chart 1). The future index for new orders held steady, but the future shipments index fell 7 points. More than 52 percent of the firms are expecting no change in their employment levels over the next six months, while the percentage expecting increases (33 percent) was substantially greater than the percentage expecting employment decreases (8 percent). The future employment index decreased slightly, from a revised reading of 24.9 in December to 24.0 in January. Energy Price Reductions Are Having a Net Positive Effect In this month’s special questions, firms were asked about the effects of lower oil prices on manufacturing business (see Special Questions). The responses indicate that the effects have been positive for most firms. Nearly 63 percent of the firms reported positive effects, while 16 percent reported negative effects. The largest percentage (39 percent) characterized the effect as slightly positive. The most frequently cited impact was that falling energy prices were lowering the costs of production (57 percent of the firms). For 23 percent of the firms, energy cost reductions were increasing sales margins. On the negative side, nearly one-third of the firms indicated they had experienced declines in business from energy production-related customers, but 10 percent reported demand increases from nonenergy-related customers. With regard to the firms’ own expectations for energy prices over the next six months, firms were evenly divided about whether there would be an increase or decrease in future demand for their manufactured products. Summary The Manufacturing Business Outlook Survey suggests a slower pace of expansion of the region’s manufacturing sector in January. The indicators for general activity and new orders both suggest moderating growth. Firms reported an overall reduction in shipments and labor usage for January. Respondents also indicated that price pressures were reduced and that lower energy prices are having net beneficial effects. Firms remain optimistic about increases in overall business and employment over the next six months. * The survey’s annual historical revisions, which incorporate new seasonal adjustment factors, were released on January 8, 2015. The full set of revised historical data is available at www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-surv ey/historical-data/revisions/historical-revisions-2015.cfm. Special Questions (January 2015) In 2014, crude oil prices fell from about $100 per barrel to nearly $55 per barrel. 1. Overall, what impacts have falling energy prices had on your business? (Choose only one) Percentages Totals Strongly positive 10.0 Modestly positive 14.3 Slightly positive 38.6 Subtotal 62.9 No impact 15.7 Slightly negative 4.3 Modestly negative 4.3 Strongly negative 7.1 Subtotal 15.7 Unsure 5.7 2. Impacts of changing energy prices manifest themselves in multiple ways. Falling energy prices have: (Choose all that apply)* Percentages Decreased demand from our energy production-related customers 32.9 Increased demand from our nonenergy production-related customers 10.0 Lowered our firm’s cost of production 57.1 Lowered our firm’s revenues 10.0 Increased our sales margins 22.9 Decreased our sales margins 5.7 No effect 27.1 Other 2.9 3. Based on your assumptions about energy prices for the next six months, you expect overall demand for your products to: (Choose only one) Percentages Totals Increase significantly 0.0 Increase modestly 11.4 Increase slightly 17.1 Subtotal 28.5 Be unaffected 31.4 Decrease slightly 15.7 Decrease modestly 7.1 Decrease significantly 5.7 Subtotal 28.5 Unsure 11.4 *Percentages for Question 2 do not add up to 100 percent because of individual firms selecting multiple responses. Summary of Returns January 2015 January vs. December Six Months from Now vs. January Prev. Prev. Diff.Inc. No chDec. Diff. Diff.Inc. No chDec. Diff. Index Index Index Index General Business 24.3 31.9 42.5 25.6 6.3 50.4 62.6 24.7 11.8 50.9 Conditions New Orders 13.6 30.8 45.9 22.3 8.5 44.8 54.8 33.6 9.9 44.8 Shipments 15.1 22.4 45.2 29.3 -6.9 47.5 51.1 37.6 10.3 40.8 Unfilled Orders 2.7 13.7 63.4 22.3 -8.6 17.4 21.6 57.1 11.9 9.7 Delivery Times -0.2 8.4 71.7 19.4 -11.0 3.7 15.8 71.1 7.7 8.1 Inventories 7.3 18.7 56.4 19.4 -0.7 11.8 23.7 52.0 16.5 7.2 Prices Paid 14.4 20.4 67.7 10.6 9.8 22.3 30.4 56.7 4.4 26.0 Prices Received 9.8 7.7 84.3 7.9 -0.2 20.6 28.0 61.8 7.3 20.7 Number of Emp. 8.4 13.1 71.7 15.1 -2.0 24.9 32.8 52.3 8.8 24.0 Avg. Emp. Wrkwk. 4.1 16.3 60.3 23.0 -6.7 16.4 22.3 59.7 9.2 13.0 Capital Ex. -- -- -- -- -- 24.8 23.0 59.4 9.8 13.2 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 January 13, 2015