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March 2018 Nonmanufacturing Business Outlook Survey

Responses to the March Nonmanufacturing Business Outlook Survey suggested that business activity in the region continued to grow. The indicators for firm-level general activity and sales/revenues remained positive but fell slightly from last month’s readings, while the indicator for new orders rose to a high level. In addition, the indicator for full-time employment improved for the second consecutive month, and the indexes for both prices paid and prices received increased. The survey’s indexes for future activity suggest that firms expect growth to continue over the next six months.


Current and Future General Activity Indexes for Firms

Current Activity Continued to Grow

The survey’s current indicators suggested continued growth in regional nonmanufacturing activity. While the diffusion index for general activity at the firm level fell 4 points to 27.6, it remains close to its historical average of 28.1 (see Chart 1). In March, 41 percent of the firms reported higher activity, compared with 14 percent that reported lower activity. The sales/revenues index fell 5 points to 24.0. Nearly 42 percent of the firms reported higher sales in March, compared with 18 percent that reported lower sales. In contrast to the downward movement in the sales/revenues index, the index for new orders jumped 15 points to 31.9, which is its highest reading since February 2015. More than 35 percent of the firms reported an increase in new orders, while only 3 percent reported a decline. The index for general activity in the region was also positive but edged down 1 point to 30.1.

Improvement in Employment Indicators

The survey’s labor market indicators improved in March. The full-time employment index rose 5 points to 22.6 this month, building on an 18 point rise in February. The share of firms reporting increases in full-time employment (28 percent) exceeded the share reporting decreases (6 percent). The part-time employment index rose 8 points to 19.5, while the workweek index rose 17 points to 29.9. The wage and benefit cost index also increased, from 34.1 in February to 40.9 in March.

Firms Report Price Increases

The respondents continued to report overall increases in prices for inputs and for their own goods and services. The prices paid index increased from 23.7 in February to 36.7 in March, its highest reading since September 2013 (see Chart 2). Nearly 37 percent of the firms reported paying higher prices, while none reported paying lower prices. The index for prices received also rose, from 12.5 in February to 18.9 in March. This index has been above its historical average of 11.7 for three consecutive months. More than 21 percent of the firms reported higher prices for their own goods and services, compared with only 2 percent that reported lower prices.


Prices Paid and Prices Received Indexes

Capital Expenditures Increase

The indexes for capital spending showed further improvement in March. The index for equipment and software spending rose 10 points to 35.1, exceeding its historical average of 22.7 for the third consecutive month. More than 38 percent of the firms reported an increase in equipment and software spending, while only 3 percent reported a decline. The index for plant spending edged up, rising from 19.8 in February to 21.6 in March.

Expectations Are Positive

The respondents to this month’s survey remained optimistic about activity over the next six months. Nonetheless, the diffusion index for future activity at the firm level fell 4 points to 54.1 (see Chart 1). More than 58 percent of the firms anticipated higher activity over the next six months, compared with only 4 percent that anticipated a decline. The future regional activity index edged down 1 point to 49.7. Both future indexes are above their historical averages (49.5 for the firm-level index and 43.7 for the regional index).

Summary

The results from this month’s Nonmanufacturing Business Outlook Survey suggest continued improvement in regional nonmanufacturing activity. The indicators for firm-level general activity and sales fell but remained positive. The indicator for new orders rose sharply, and the firms reported increases in full-time employment. The survey’s respondents remain optimistic about growth over the next six months.

Summary of Returns (March 2018)

Summary of Returns

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March 2018 PDF

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Questions?

Questions about the Nonmanufacturing Business Outlook Survey and its historical data can be addressed to Elif Sen. E-mail