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February 2019 Nonmanufacturing Business Outlook Survey

Responses to the February Nonmanufacturing Business Outlook Survey suggest that nonmanufacturing activity improved in the region. The indexes for general activity at the firm level, new orders, and sales/revenues all rebounded from last month’s particularly low readings. In addition, the employment indicators increased, but the indexes for prices paid and prices received both decreased. 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 Indicators Rebound

The survey’s indicators for current activity suggest improvement in the nonmanufacturing sector of the regional economy. The diffusion index for current general activity at the firm level increased 29 points in February to 29.2, after registering two consecutive months well below its historical average (see Chart). Over 48 percent of the firms reported increases in activity (up from 31 percent last month), compared with 19 percent that reported decreases (down from 31 percent last month). The new orders index rebounded from its negative reading last month, rising 20 points to 16.5. The share of firms reporting increases in new orders (30 percent) exceeded the share reporting decreases (14 percent). The sales/revenues index rose from 3.9 in January to 19.4 in February. Over 36 percent of the firms reported increases in sales/revenues, while 17 percent reported declines.

Employment Indicators Strengthen

Responding firms reported overall increases in both full- and part-time employment. After falling for four consecutive months, the full-time employment index rose from 9.4 in January to 22.0 in February. The share of firms reporting increases in full-time employment (31 percent) exceeded the share reporting decreases (9 percent); the majority (58 percent) reported no change. The part-time employment index rose 14 points to 19.3, and the average workweek index increased to 18.5. The wages and benefits indicator rose 9 points to 38.5.

Price Indicators Moderate

The indexes for prices paid for inputs and prices received for the firms’ own products and services both fell in February. The prices paid index fell 10 points to 16.3. Over 22 percent of the respondents reported increases in input prices, while only 6 percent reported decreases. Most firms (56 percent) reported no change in input prices. The prices received index fell from 14.9 in January to 9.1 in February. Nearly 14 percent of the firms reported increases in prices received, while only 4 percent reported decreases. Almost 66 percent of the firms reported no change in their own prices.

Firms’ Forecasts for Prices Remain Stable

In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and services and for U.S. consumers over the next four quarters (see Special Questions). Regarding their own prices, the firms’ median forecast was for an increase of 2.0 percent, the same rate reported when the question was last asked in November. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 2.7 percent, the same as the previous forecast. 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. The firms’ forecast for the long-run (10-year) inflation rate remained at 3.0 percent.

Firms’ Optimism for Growth Recovers

The respondents regained their optimism about growth in nonmanufacturing activity over the next six months. Following a 20-point decline in January, the diffusion index for future activity at the firm level increased 36 points to 58.9 (see Chart). Sixty-six percent of the firms expect an increase in activity at their firms over the next six months (up from 49 percent last month), compared with 7 percent that expect a decline (down from 26 percent). The future regional activity index more than recovered from its decline last month, rising 17 points to 27.4.

Summary

Results from this month’s Nonmanufacturing Business Outlook Survey suggest improvement in regional nonmanufacturing activity. The indicators for firm-level general activity, new orders, and sales/revenues all recovered from low January figures, while the firms reported overall increases in both full-time and part-time employment. The respondents continued to expect growth over the next six months.

Special Questions (February 2019)

Over the next year (2019:Q1 to 2020:Q1), please list your expected annual percent change with respect to the following:

Current Forecast

Previous Forecast
(November 2018)

1. For your firm:

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

2.0

2.0

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

3.0

3.0

2. For your employees:

Prices your employees will pay (for goods and services where they live).

2.7

2.5

3. For U.S. consumers:

Prices U.S. consumers will pay (for goods and services).

2.7

2.7
For the next 10 years (2019 through 2028), what is your expected annual
average percent change with respect to the following:

4. For U.S. consumers:

 

Prices U.S. consumers will pay (for goods and services).

3.0

 3.0

The numbers represent medians of the individual forecasts (as percent changes). The forecasts are over the next year for questions 1 to 3 and an annual average for the next 10 years for question 4.

Summary of Returns (February 2019)

Summary of Returns

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February 2019 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