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December 2018 Manufacturing Business Outlook Survey

Manufacturing activity in the region continued to grow but remained subdued, according to results from the December Manufacturing Business Outlook Survey. The survey’s broad indicators were positive, but their movements were mixed this month: The general activity and shipments indicators fell from their readings last month, while the indicators for new orders and employment increased. The firms remained generally optimistic about future growth.

Current Indicators Remained Muted

The diffusion index for current general activity decreased from 12.9 in November to 9.4 this month, its lowest reading since August 2016 (see Chart 1). Over 26 percent of the manufacturers reported increases in overall activity this month, while 17 percent reported decreases. The new orders index increased 5 points to 14.5 but remains notably lower than its average reading for the year. The current shipments index decreased 12 points to 10.0, its lowest reading in 27 months. Both the unfilled orders and delivery times indexes were positive this month, suggesting higher unfilled orders and slower delivery times.

Chart 1

The firms continued to report overall higher employment. Over 24 percent of the responding firms reported increases in employment this month, while 6 percent of the firms reported decreases in employment. The current employment index remained positive and edged 2 points higher to 18.3. The current workweek index fell 6 points to 0.5, its lowest reading in 26 months.

Price Indexes Stay Positive but Lower Than at Midyear

The survey’s diffusion indexes for prices remained positive, suggesting continued increases in firms’ input prices and the prices for their own manufactured goods. On the cost side, 42 percent of the firms reported increases in the prices paid for inputs. The prices paid index edged down 1 point and remains 25 points below its peak in July (see Chart 2). The prices received index increased 4 points to 26.2, its highest reading in four months, but 10 points below its peak in May.

Chart 2

Six-Month Indicators Remain Positive

The diffusion index for future general activity increased 5 points to a reading of 31.7 this month (see Chart 1). Over 43 percent of the firms expect increases in activity over the next six months, while 12 percent expect declines. The future new orders and shipments indexes, however, decreased 5 points and 3 points, respectively. The future employment index edged up 2 points, with 38 percent of the firms indicating that they expect to add workers over the next six months.

Firms Expect Highest Cost Increases for Health Benefits

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. Wages are expected to increase by an average of 2.8 percent, while health benefits are expected to rise 4.5 percent, and nonhealth benefits are expected to rise 1.9 percent. The costs of raw materials and intermediate goods are expected to increase next year by an average of 3.2 percent and 2.4 percent, respectively. Energy prices are expected to increase only 0.4 percent.

Summary

The firms’ responses indicated continued growth in the region’s manufacturing sector this month. The survey’s broad current indicators remained positive and at relatively low levels. The firms continued to report increases in overall employment, however, with plans for further increases over the next six months. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.

Special Questions (December 2018)

What percentage change in costs do you expect for the following categories in 2019?
 
Energy
(%)
Other Raw Materials
(%)
Intermediate Goods
(%)
Wages
(%)
Health Benefits
(%)
Nonhealth Benefits
(%)
 Wages + Health Benefits + Nonhealth Benefits (%)
Decline of more than 4% 0.0 0.0 0.0 0.0 0.0 0.0  0.0
Decline of 3–4% 3.4 0.0 0.0 0.0 0.0 0.0  0.0
Decline of 2–3% 8.5 0.0 0.0 0.0 0.0 0.0  0.0
Decline of 1–2% 11.9 1.7 1.8 0.0 3.3 0.0  0.0
No change 33.9 10.0 10.5 1.7 13.3 27.6  3.4
Increase of 1–2% 25.4 21.7 29.8 10.0 8.3 20.7  11.9
Increase of 2–3% 11.9 28.3 26.3 50.0 13.3 29.3  23.7
Increase of 3–4% 1.7 18.3 21.1 35.0 10.0 13.8  28.8
Increase of 4–5% 3.4 6.7 8.8 3.3 21.7 6.9  13.6
Increase of 5–7.5% 0.0 6.7 0.0 0.0 13.3 1.7  11.9
Increase of more than 7.5% 0.0 6.7 1.8 0.0 16.7 0.0  6.8
Median Expected Change 0.0 2.5 2.5 2.5 4.5 1.5  3.5
Average Expected Change 0.4 3.2 2.4 2.8 4.5 1.9  4.0
 *Firms responded to more detailed changes than shown in the provided ranges.

View Complete Writeup

A complete writeup of this survey, including all tables, is available in PDF format.

December 2018 PDF

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Questions?

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