Nonmanufacturing Business Outlook Survey December 2022 Note: Survey responses were collected from December 5 to December 15. Nonmanufacturing activity in the region remained weak this month, according to the firms responding to the December Nonmanufacturing Business Outlook Survey. The index for general activity at the firm level turned positive but remained low. The new orders and sales/revenues indexes were negative, and the full-time employment index declined to a low but positive reading this month. The prices paid and prices received indexes both fell. Expectations for growth over the next six months were more widespread. Current Indexes Are Mixed The diffusion index for current general activity at the firm level rose from a reading of -2.6 in November to 3.4 this month. More than 30 percent of the firms reported increases in activity, slightly exceeding the 27 percent that reported decreases. The new orders index was essentially unchanged at -6.1 this month, its fifth consecutive negative reading. Nearly 22 percent of the firms reported increases in new orders, less than the 28 percent that reported decreases. The sales/revenues index decreased 4 points to -0.7, its first negative reading since August. More than 30 percent of the responding firms reported increases in sales/revenues, while 31 percent reported decreases. The regional activity index declined further from -13.6 to -17.1 this month. Employment Indicators Weaken On balance, the firms reported increases in full-time employment this month, but the index fell 7 points to 3.4. More than 67 percent of the firms reported steady full-time employment levels, while the share of firms reporting increases (16 percent) was slightly higher than the share reporting decreases (12 percent). The part-time employment index improved from -8.4, but it remained negative at -4.6. Price Increases Are Less Widespread The prices paid and prices received indexes continued to indicate overall price increases but declined, suggesting less widespread price increases this month. The prices paid index decreased 9 points to 43.3. Over 46 percent of the respondents reported higher input prices, 40 percent reported no change, and 3 percent reported decreases. Regarding prices for the firms' own goods and services, the prices received index fell from 23.5 to 9.3. The share of firms reporting increases in the prices they received (18 percent) exceeded the share reporting decreases (9 percent). Most of the firms (60 percent) reported no change in prices for their own goods and services. Firms Report Higher Sales/Revenues and Lower Constraints In this month's special questions, the firms were asked to estimate their total sales/revenues growth for the fourth quarter ending this month compared with the third quarter of 2022; they were also asked about factors constraining business operations (see Special Questions). The share of firms reporting expected increases in fourth-quarter sales/revenues (53 percent) was greater than the share reporting decreases (36 percent). Most of the firms indicated that labor supply and supply chains were at least slightly constraining activity in the current quarter (29 percent and 30 percent, respectively). Almost 57 percent of the respondents cited energy markets as a constraint in the current quarter. Looking ahead over the next three months, most of the firms expect the impacts of various factors to stay the same; however, 37 percent of the firms expect financial capital impacts to worsen, and 32 percent of the firms expect energy market impacts to worsen. More than 30 percent of the firms expect the impacts of supply chains to improve. Future Indicators Improve Both future activity indexes suggest that the firms anticipate growth over the next six months. The diffusion index for future activity at the firm level rose from a reading of 7.0 in November to 23.6 this month. Over 45 percent of the firms expect an increase in activity at their firms over the next six months, 22 percent expect decreases, and 31 percent expect no change. The future regional activity index increased from -8.9, turning positive at 3.6. Summary Responses to this month's Nonmanufacturing Business Outlook Survey suggest weak nonmanufacturing activity in the region. The indicator for firm-level general activity turned positive but remained low, and the indexes for new orders and sales/revenues were negative. The full-time employment index fell to a low but positive reading. Both price indexes decreased. Overall, the responding firms expect growth over the next six months in their own firms and in the region. Special Questions (December 2022) 1. How will your firm's total sales/revenues for the fourth quarter of 2022 compare with that of the third quarter of 2022? An increase of: % of firms Subtotals 10% or more 12.7 % of firms reporting an increase: 5–10% 9.1 52.7 0–5% 30.9 No change 10.9 A decline of: 0–5% 14.5 % of firms reporting a decrease: 5–10% 9.1 36.3 10% or more 12.7 2. In the current quarter, to what degree have the following factors acted as constraints on business operations? Not at all Slightly Moderately Significantly (%) (%) (%) (%) Covid-19 mitigation measures 58.5 33.8 6.2 1.5 Energy markets 43.1 29.2 18.5 9.2 Financial capital 51.6 19.4 16.1 12.9 Labor supply 23.1 29.2 21.5 26.2 Supply chains 29.7 29.7 23.4 17.2 Other factors 51.4 18.9 21.6 8.1 3. Over the next three months, do you expect the impacts of the following factors as constraints on business operations to change? Worsen Stay the same Improve (%) (%) (%) Covid-19 mitigation measures 11.5 72.1 16.4 Energy markets 31.7 53.3 15.0 Financial capital 36.7 58.3 5.0 Labor supply 24.6 59.0 16.4 Supply chains 16.9 52.5 30.5 Other factors 16.7 83.3 0.0 Nonmanufacturing Business Outlook Survey December 2022 December vs. November Previous Diffusion No Diffusion Index Increase Change Decrease Index General Activity -13.6 19.5 36.7 36.6 -17.1 - in Region General Activity -2.6 30.4 36.4 27.0 3.4 - at Firm New Orders -6.3 21.7 29.7 27.9 -6.1 Sales/Revenues 3.5 30.5 34.9 31.2 -0.7 Unfilled Orders 1.4 10.1 21.2 10.5 -0.4 Inventories -4.4 7.7 14.2 9.1 -1.4 Prices Paid 52.5 46.4 39.5 3.1 43.3 Prices Received 23.5 18.2 60.2 8.9 9.3 Full-Time Emp. 10.0 15.5 67.6 12.1 3.4 Part-Time Emp. -8.4 8.0 65.0 12.6 -4.6 Avg. Emp. Wrkwk. 10.4 20.1 62.2 12.4 7.7 Wage and Ben. 41.5 43.8 50.9 0.8 42.9 Cap. Ex. - Plant 9.3 12.0 46.3 12.1 -0.1 Cap. Ex. - Equip. 22.7 22.7 49.6 11.3 11.4 Six Months from Now vs. December ` Future Activity -8.9 33.8 32.5 30.2 3.6 - in Region Future Activity 7.0 45.4 31.2 21.8 23.6 - at Firm Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 because of rounding, omission by respondents, or both. (4) Survey results reflect data received through December 15, 2022. Federal Reserve Bank of Philadelphia Nonmanufacturing Business Outlook Survey Released: December 20, 2022, at 8:30 a.m. ET.