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March 2009 Business Outlook Survey

Survey Press Conference

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The region's manufacturing sector continued to contract this month, according to firms polled for the March Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment remained significantly negative. Employment losses were substantial again this month, with over half of the surveyed firms reporting declines. Firms continued to report declines in input prices and prices for their own manufactured goods. Most of the indicators of future activity suggest that the region's manufacturing executives expect declines to bottom out over the next six months, but the firms' employment forecasts suggest continued weakness.

Indicators Reflect Further Contraction

The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, edged higher, from -41.3 in February to -35.0 this month. Last month's reading was the lowest since October 1990. The index has been negative for 15 of the past 16 months, a period that corresponds to the current recession (see Chart). Continued weakness was evident in all of the broad indicators this month. The survey's current new orders index declined nearly 10 points, to -40.7, its lowest reading since July 1980. The shipments index increased six points, but this follows a record low in February. The survey's current inventory index declined precipitously this month, from -24.3 to -55.6, its lowest reading in the history of the survey.

The current employment index fell for the sixth consecutive month, declining six points, to -52.0, its lowest reading in the history of the survey. Fifty-two percent of firms reported a decrease in employment this month, and no firms reported increases. The average workweek index improved 13 points, but it remains at a low reading of -31.6.

Declines in Prices Reported

For the fifth consecutive month, firms reported declines in the prices paid for inputs and the prices received for their own manufactured goods. Thirty-seven percent of the firms reported paying lower prices for inputs; only 5 percent reported paying higher prices. The prices paid index decreased to a record low reading of -31.3 this month. Reflecting weak conditions, 38 percent of the firms reported receiving lower prices for their own manufactured goods; only 5 percent reported higher prices this month. The prices received index remained negative for the fifth consecutive month and edged five points lower, nearly matching its record low reading in December 2008.

Six-Month Indicators Are Mixed

The future general activity index remained positive for the third consecutive month but decreased slightly, from 15.9 in February to 14.5 this month (see Chart). The indexes for future new orders and shipments also decreased but by a larger amount — each fell 12 points. On balance, firms still expect decreases in employment over the next six months: The future employment index remained negative for the sixth consecutive month and was virtually unchanged from its reading last month. Thirty percent of the firms expect employment to decline over the next six months; only 13 percent expect employment to increase. The six-month index for capital expenditures also declined to a new record low this month, with 32 percent of the firms anticipating a reduction in capital spending over the next six months.

In special questions this month, firms were asked about their expectations for production growth for the upcoming second quarter (see Special Questions). Nearly 45 percent of the firms expect declines in production in the second quarter, while 35 percent expect increases. Nearly 21 percent of the firms are expecting declines of more than 10 percent, and the average decline was 2.4 percent for the full sample. Forty-six percent of the firms said second-quarter production growth would be worse than the first quarter's performance; 28 percent said the expected growth represented an improvement. Among those expecting declines in the second quarter, a majority (51 percent) indicated that a bottoming out of declines would occur in the third quarter, 29 percent expect it to occur in the fourth quarter, and 20 percent think it will happen in the first quarter of next year.


According to respondents to the March survey, activity in the region's manufacturing sector continued to decline this month. Indicators for general activity, new orders, shipments, and employment suggested that declines continue to be broad-based. Over half of the firms reported declines in employment, and hours worked continued to fall. Indicators for industrial prices are at, or near, record lows for the survey. While the region's manufacturing executives continue to expect some recovery over the next six months, most indicators of future activity fell this month. Firms expect employment losses to continue, and plans for capital spending continue to be reduced.

Special Questions (March 2009)

1. What change, if any, do you anticipate in your firm's production during the second quarter of 2009 compared to the first quarter?
Decrease of more than 10%
Decrease of 5-10%
Decrease of 0-5%
Total decrease
No change
Increase of less than 2%
Increase of 2-4%
Increase of more than 4%
Total increase
Average: -2.4%; Median: 0.0%
2. Would this represent a worsening or improvement in growth from the first quarter?
Significantly worse
Somewhat worse
No change
Some improvement
Significant improvement
3. If production is expected to decline in the second quarter, when do you expect a bottoming out of the decreases?
Third quarter 2009
Fourth quarter 2009
First quarter 2010
Second quarter 2010

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Questions about the Business Outlook Survey and its historical data can be addressed to Mike Trebing. E-mail