Nonmanufacturing Business Outlook Survey January 2022 Note: Survey responses were collected from January 10 to January 20. Responses to the January Nonmanufacturing Business Outlook Survey suggest weakened nonmanufacturing activity in the region. The indexes for general activity at the firm level, sales/revenues, and new orders all posted sharp declines but remained slightly positive. Additionally, the index for full- time employment decreased. The firms continued to report overall increases in the prices of both their own goods and their inputs. The respondents continue to anticipate growth over the next six months. Current Indexes Deteriorate The diffusion index for current general activity at the firm level fell sharply from a revised reading of 25.9 in December to 2.6 this month, its lowest reading since January 2021. Almost 32 percent of the firms reported increases in activity, while 29 percent reported decreases. The new orders index fell 15 points to 0.6 in January. Thirty percent of the respondents reported steady new orders, and equal shares (23 percent) reported increases or decreases. The sales/revenues index fell 23 points to 4.6 in January. Nearly 35 percent of the responding firms reported increases in sales/revenues, while 30 percent reported decreases. The regional general activity index plummeted to -16.2. Employment Indicators Contract The firms reported overall increases in full-time and part-time employment, but both indexes fell from their readings last month. The full-time employment index fell 8 points to a reading of 5.7 in January. More than 58 percent of the firms reported steady full-time employment levels, while the share of firms reporting increases (21 percent) was higher than the share reporting decreases (15 percent). The part-time employment index fell 4 points to 2.5. Firms Continue to Report Overall Price Increases The prices paid index increased 12 points to 63.0. Sixty-three percent of the respondents reported increased input prices, while 25 percent of the respondents reported steady input prices. None of the responding firms reported decreases in prices paid. Regarding prices for the firms' own goods and services, the prices received index increased from 29.9 to 37.9. The share reporting increases in prices received (41 percent) far exceeded the share reporting decreases (3 percent). More than 44 percent of the firms reported no change in prices for their own goods and services. Firms Expect Higher Cost Increases This Year In this month's special questions, the firms were asked about their expectations for changes in various input and labor costs for the coming year (see Special Questions). Responses indicate an expected average increase of 7.3 percent for raw materials, followed by total compensation (wages plus benefits), intermediate goods, and energy, which are all expected to increase between 5 and 6 percent on average. The firms also expect wages to rise an average of 4.5 percent in 2022. Comparing the expected change in costs for 2022 with 2021, the respondents indicated increases across all categories of expenses. Firms Continue to Anticipate Growth Both future activity indexes suggest that firms continue to anticipate growth over the next six months. The diffusion index for future activity at the firm level remained mostly steady at a reading of 56.3 this month. Over 68 percent of the firms expect an increase in activity at their firms over the next six months, compared with 12 percent that expect decreases and 20 percent that expect no change. The future regional activity index increased 6 points to 47.1. Summary Responses to this month's Nonmanufacturing Business Outlook Survey suggest weakened nonmanufacturing activity in the region. The indicators for firm-level general activity, new orders, and sales/revenues all fell substantially. The indexes for full-time and part-time employment declined. Both the indexes for prices paid and prices received remained elevated and increased further. Overall, the responding firms continue to expect growth over the next six months in their own firms and in the region. Special Questions (January 2022) 1. What percentage change in costs do you expect for the following categories over all of 2022?* Energy Other Inter- Wages Health Non- Wages + (%) Raw mediate (%) Benefits health Health Materials goods (%) Benefits Benefits + (%) (%) (%) Nonhealth Benefits (%) Decline of more than 1% 1.7 0.0 0.0 4.7 1.8 0.0 3.6 No change 10.2 10.3 16.7 12.5 25.0 42.3 8.9 Increase of 1-2% 6.8 7.7 8.3 1.6 3.6 5.8 3.6 Increase of 2-3% 15.3 10.3 8.3 7.8 1.8 11.5 8.9 Increase of 3-4% 13.6 5.1 13.9 18.8 16.1 19.2 12.5 Increase of 4-5% 8.5 23.1 22.2 26.6 12.5 11.5 17.9 Increase of 5-7.5% 23.7 2.6 2.8 12.5 23.2 5.8 16.1 Increase of 7.5-10% 10.2 15.4 11.1 7.8 7.1 3.8 16.1 Increase of 10-12.5% 3.4 10.3 8.3 1.6 1.8 0.0 3.6 Increase of more than 12.5% 6.8 15.4 8.3 6.3 7.1 0.0 8.9 ------------------- ------------------------------------------------------------ Average Exp. Change 5.3 7.3 5.6 4.5 4.7 2.3 5.7 2. Do you expect these changes in costs to be higher, the same, or lower than the actual cost changes for 2021? Higher 83.9 84.4 80.4 83.1 71.0 57.9 83.9 Same 12.9 13.3 17.4 13.8 27.4 42.1 14.5 Lower 3.2 2.2 2.2 3.1 1.6 0.0 1.6 ------------------------------------------------------------------------------- Diffusion Index (Higher Minus Lower) 80.6 82.2 78.3 80.0 69.4 57.9 82.3 *The firms responded to more detailed changes than shown in the provided ranges. Nonmanufacturing Business Outlook Survey January 2022 January vs. December Previous Diffusion No Diffusion Index Increase Change Decrease Index General Activity 27.3 21.3 39.5 37.5 -16.2 - in Region General Activity 25.9 31.8 37.9 29.2 2.6 - at Firm New Orders 15.2 23.1 30.2 22.5 0.6 Sales/Revenues 27.6 34.7 30.3 30.1 4.6 Unfilled Orders 14.0 17.3 24.6 6.5 10.8 Inventories 1.5 9.2 18.2 13.8 -4.6 Prices Paid 50.8 63.0 25.1 0.0 63.0 Prices Received 29.9 41.3 44.1 3.4 37.9 Full-Time Emp. 13.6 20.6 58.3 14.9 5.7 Part-Time Emp. 6.8 13.3 62.7 10.8 2.5 Avg. Emp. Wrkwk. 16.7 20.9 60.4 11.3 9.6 Wage and Ben. 58.8 58.2 31.5 3.6 54.6 Cap. Ex. - Plant 18.6 23.8 40.9 3.1 20.7 Cap. Ex. - Equip. 16.6 32.7 48.9 3.7 28.9 Six Months from Now vs. January ` Future Activity 41.2 61.9 21.8 14.8 47.1 - in Region Future Activity 56.6 68.4 19.6 12.0 56.3 - at Firm Notes: (1) Diffusion indexes represent the percentage indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect information received through January 20, 2022. Federal Reserve Bank of Philadelphia Nonmanufacturing Business Outlook Survey Released: January 25, 2022, at 8:30 a.m. ET.