Nonmanufacturing Business Outlook Survey July 2024 Note: Survey responses were collected from July 8 to July 18. Nonmanufacturing activity in the region declined this month, according to the firms responding to the July Nonmanufacturing Business Outlook Survey. The indexes for general activity at the firm level, new orders, and sales/revenues turned negative. The full-time employment index suggested a decline in employment. Both price indexes continued to indicate overall increases in prices and remain near nonrecession averages. The firms continue to expect growth over the next six months at their own firms and in the region, but expectations were less widespread. Current Indicators Weaken The diffusion index for current general activity at the firm level turned negative, falling from a reading of 15.1 in June to -10.0 this month, its lowest reading since April 2023. Nearly 31 percent of the firms reported decreases, while 21 percent reported increases; 44 percent reported no change in activity. The new orders and sales/revenues indexes also turned negative this month. The new orders index fell from 6.7 to -7.1. More than 22 percent of the firms reported decreases in new orders, while 15 percent reported increases. The sales/revenues index dropped 18 points to -3.5. More than 25 percent of the firms reported decreases in sales/revenues, while 22 percent reported increases. The regional activity index fell 22 points to -19.1, its lowest reading since December 2020. Firms Report Overall Decrease in Full-Time Employment On balance, the firms reported a decrease in full-time employment; however, most firms continued to report no change in employment. The full-time employment index fell 20 points to -4.9 this month, its first negative reading since June 2023. Almost 19 percent of the firms reported decreases, while 14 percent reported increases; nearly 66 percent of the firms reported no change. The part-time employment index declined from 13.1 to 4.0. Most firms (63 percent) reported steady part-time employment, while the share of firms reporting increases (15 percent) exceeded the share reporting decreases (11 percent). The average workweek index turned negative, falling 11 points to -1.0. Price Indexes Near Long-Run Averages Price indicator readings suggest continued increases in input prices and prices for the firms’ own goods and services this month. Both price indexes were near their long-run averages. The prices paid index rose 6 points to 30.2. Over 32 percent of the respondents reported higher input prices, while 2 percent reported decreases; 59 percent reported no change. Regarding prices for the firms’ own goods and services, the prices received index declined from 16.6 to 13.9. Twenty-three percent of the firms reported increases in their own prices, while 9 percent reported decreases; 59 percent reported no change. Firms Expect Smaller Increases for Wages In special questions this month, the firms were asked about changes in wages and compensation in the past three months as well as their expected changes to various input and labor costs for 2024. Almost 30 percent of the firms indicated wages and compensation costs had increased in the past three months, 68 percent reported no change, and 2 percent reported decreases. Most firms (60 percent) reported not adjusting their 2024 budgets for wages and compensation since the start of the year, while similar shares indicated they are planning to increase wages and compensation more than originally planned (18 percent) and sooner than originally planned (16 percent). The firms still expect higher costs across most expense categories in 2024; however, the median expected increases were in line with or slightly lower than expectations for all categories when this was last asked in April. Although the firms now expect somewhat lower increases in costs for wages, intermediate goods, and nonhealth benefits than when asked in April, expectations for increases in total compensation (wages plus benefits) costs remained at a median of 4 to 5 percent. Firms Continue to Anticipate Growth The future general activity indexes continued to suggest firms expect growth in the next six months. The index for future general activity at the firm level fell to 30.5 this month. Over 48 percent of the firms expect an increase in activity at their firms over the next six months, 18 percent expect decreases, and 32 percent of the firms expect no change. The future regional activity index fell to 19.7. Summary Responses to this month’s Nonmanufacturing Business Outlook Survey suggest a decline overall in nonmanufacturing activity in the region. The indicators for firm-level general activity, new orders, and sales/revenues turned negative. The full-time employment index declined and suggests overall decreases in full-time employment. Both price indexes continue to indicate overall price increases. On balance, the firms continue to expect growth over the next six months, but the future activity indexes declined. Special Questions (July 2024) 1. How have wages and compensation changed at your firm over the past three months? Percent (%) Increased 29.5 No change 68.2 Decreased 2.3 2. Since the beginning of the year, have you adjusted your budget for wages and compensation for 2024?* Yes, and we are planning to increase wages and compensation by more than originally planned. 17.8 Yes, and we are planning to increase wages and compensation sooner than originally planned. 15.6 No, we have not needed to make adjustments. 60.0 Other 8.9 *Percentages do not sum to 100 because more than one option could be selected. 3. What percentage change in costs do you now expect for the following categories over all of 2024?** Energy Other Inter- Wages Health Non- Wages + (%) Raw mediate (%) Benefits health Health Materials goods (%) Benefits Benefits + (%) (%) (%) Nonhealth Benefits (%) Decline of more than 1% 3.2 9.5 11.1 2.6 0.0 0.0 3.2 No change 32.3 28.6 33.3 23.7 17.6 51.6 9.7 Increase of 1–2% 12.9 9.5 16.7 5.3 5.9 12.9 6.5 Increase of 2–3% 9.7 14.3 27.8 21.1 8.8 16.1 6.5 Increase of 3–4% 6.5 9.5 5.6 21.1 8.8 3.2 9.7 Increase of 4–5% 9.7 14.3 0.0 15.8 23.5 9.7 32.3 Increase of 5–7.5% 16.1 9.5 0.0 2.6 14.7 0.0 6.5 Increase of 7.5–10% 6.5 0.0 0.0 2.6 5.9 0.0 6.5 Increase of 10–12.5% 3.2 4.8 5.6 2.6 5.9 0.0 12.9 Increase of more than 12.5% 0.0 0.0 0.0 2.6 8.8 6.5 6.5 ---------------------------------------------------------------------------------- Median Exp. Change 2-3% 2-3% 1-2% 2-3% 4-5% -1-1% 4-5% Median Exp. Change (April 2024) 2-3% 2-3% 2-3% 3-4% 4-5% 1-2% 4-5% **The firms responded to more detailed changes than shown in the provided ranges. Nonmanufacturing Business Outlook Survey July 2024 July vs. June Previous Diffusion No Diffusion Index Increase Change Decrease Index General Activity 2.9 13.1 48.7 32.2 -19.1 - in Region General Activity 15.1 20.7 44.0 30.7 -10.0 - at Firm New Orders 6.7 15.0 34.3 22.1 -7.1 Sales/Revenues 14.3 22.1 48.8 25.6 -3.5 Unfilled Orders 10.5 5.5 36.6 7.5 -1.9 Inventories 7.5 0.0 26.6 1.5 -1.5 Prices Paid 24.4 32.5 59.0 2.2 30.2 Prices Received 16.6 23.0 58.8 9.1 13.9 Full-Time Emp. 14.6 13.8 65.5 18.7 -4.9 Part-Time Emp. 13.1 15.3 63.2 11.2 4.0 Avg. Emp. Wrkwk. 9.8 19.1 60.5 20.1 -1.0 Wage and Ben. 27.6 30.3 66.8 0.5 29.8 Cap. Ex. - Plant 7.9 10.4 54.3 1.1 9.3 Cap. Ex. - Equip. 24.5 16.4 59.9 5.6 10.8 Six Months from Now vs. July ` Future Activity 44.7 41.5 28.1 21.7 19.7 - in Region Future Activity 52.1 48.2 31.8 17.8 30.5 - 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 July 18, 2024. Federal Reserve Bank of Philadelphia Nonmanufacturing Business Outlook Survey Released: July 23, 2024, at 8:30 a.m. ET.