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November 2019 Manufacturing Business Outlook Survey

Manufacturing activity in the region continued to grow, according to results from the November Manufacturing Business Outlook Survey. The survey’s broad indicators remained positive, although their movements were mixed this month: The indicator for general activity increased, but the new orders, shipments, and employment indicators decreased from their readings last month. The survey’s future activity indexes remained positive, suggesting continued optimism about growth for the next six months.

Current Indicators Suggest Overall Growth

The diffusion index for current general activity rose 5 points this month to 10.4, after decreasing 6 points in October (see Chart). The percentage of firms reporting increases (30 percent) this month exceeded the percentage reporting decreases (20 percent). The indexes for current shipments and new orders both fell: The current new orders index decreased 18 points, while the shipments index decreased 9 points. Both the unfilled orders and delivery times indexes remained positive this month, suggesting higher unfilled orders and slower delivery times.

Chart1

The firms reported overall increases in manufacturing employment this month, but the current employment index decreased 11 points to 21.5. Nearly 27 percent of the firms reported higher employment, compared with 34 percent last month. Over 5 percent of the firms reported decreases in employment this month, while 68 percent reported no change. The average workweek index also decreased but remained positive.

Price Indexes Suggest Softening in Prices

The firms continued to report overall increases in prices paid for inputs and received for goods, but the indicators for both measures declined for the second consecutive month. The prices paid diffusion index decreased 9 points to 7.8, its lowest level since March 2016. The percentage of firms reporting increases in input prices (17 percent) remained higher than the percentage reporting decreases (9 percent). The current prices received index, reflecting the manufacturers’ own prices, decreased 4 points to a reading of 12.2.

Firms Expect Own Prices to Rise Faster Than Inflation

In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms’ median forecast was for an increase of 2.5 percent, higher than the 2.0 percent that was forecast when the same question was last asked in August. The firms’ actual price change over the past year was 2.0 percent, down from 2.5 percent in the prior quarter. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was unchanged at 2.0 percent. The firms’ median forecast for the long-run (10-year average) inflation rate increased from 2.2 percent to 2.5 percent.

Firms Remain Generally Optimistic

The diffusion index for future general activity rose 2 points to 35.8 after increasing 13 points in October (see Chart). Nearly 52 percent of the firms expect increases in activity over the next six months, while 16 percent expect declines. The future new orders index held steady, while the future shipments index decreased 2 points. The future employment index rose 2 points from the previous month, as firms remained optimistic about future hiring: Thirty-seven percent of the firms expect higher employment over the next six months. The firms were less optimistic about future capital spending this month: The future capital spending index decreased 17 points to its lowest reading in three years.

Summary

Responses to the November Manufacturing Business Outlook Survey suggest growth in manufacturing activity this month. The general activity index showed improvement this month, but the indicators for new orders, shipments, and employment decreased from last month’s readings. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.

Special Questions (November 2019)

Please list the annual percent change with respect to the following:

Current

Previous
(August 2019)

For your firm:

Forecast for next year (2019Q4–2020Q4)

1. Prices your firm will receive (for its own goods and services sold).

2.5

2.0

2. Compensation your firm will pay per employee (for wages and benefits).

3.0

3.0

Last year's price change (2018Q4–2019Q4)

3. Prices your firm did receive (for its own goods and services sold) over the last year.

2.0

2.5

For U.S. consumers:

4. Prices consumers will pay for goods and services over the next year.

2.0

2.0

5. Prices U.S. consumers will pay for goods and services over the next 10 years (2019–2028).

2.5

2.2

The numbers represent medians of the individual forecasts (percent changes). For question 5, the firms reported a 10-year annual-average change.


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November 2019 PDF

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Questions?

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