April 2023 Manufacturing Business Outlook Survey

Note: Survey responses were collected from April 10 to April 17.

Manufacturing activity in the region continued to decline overall in April, according to the firms responding to this month’s Manufacturing Business Outlook Survey. The survey’s broad indicators for activity remained negative, although the indexes for new orders and shipments rose. The employment index suggests steady employment overall. Both price indexes continued to decline. The future indicators suggest that firms’ expectations for growth over the next six months remain subdued.

Current Indicators Remain Negative

The diffusion index for current general activity decreased 8 points to -31.3 in April, its eighth consecutive negative reading and lowest reading since May 2020 (see Chart 1). Although most firms reported no change in activity (59 percent), the share of firms reporting decreases (35 percent) exceeded the share of firms reporting increases (3 percent). The indexes for new orders and shipments both remained negative but increased this month: The new orders index rose 6 points to -22.7, and the shipments index climbed 18 points to -7.3. Almost 28 percent of the firms reported decreases in shipments (down from 31 percent last month) compared with 20 percent that reported increases (up from 6 percent last month).

On balance, the firms reported mostly steady levels of employment. The employment index rose 10 points to a near-zero reading. Similar shares of the firms reported increases and decreases in employment (16 percent); most firms (67 percent) reported no change. The average workweek index rose from -22.0 to -8.4.

Price Increases Are Less Widespread

The indicators for prices paid and prices received declined to their lowest readings since mid-2020. The prices paid index declined for the second consecutive month, falling 15 points to 8.2 (see Chart 2). Almost 19 percent of the firms reported increases in input prices, while 10 percent reported decreases; 70 percent of the firms reported no change. The current prices received index fell 11 points to -3.3, its third consecutive decline and first negative reading since May 2020. Over 7 percent of the firms reported increases in prices received for their own goods this month, 10 percent reported decreases, and 83 percent reported no change.

Firms Expect Smaller Increases for Wages

In this month’s special questions, the firms were asked about changes in wages and compensation over the past three months, as well as their updated expectations for changes in various input and labor costs for the current year. More than 55 percent of the firms indicated wages and compensation costs had increased over the past three months, 45 percent reported no change, and none reported decreases. Most firms (58 percent) have reported not needing to adjust their 2023 budgets for wages and compensation since the beginning of the year; however, almost 33 percent noted they are planning to increase wages and compensation by more than originally planned, and 10 percent noted they are planning to increase wages and compensation sooner than originally planned.

The firms still expect cost increases across all categories of expenses in 2023, and the median expected increases were in line with or slightly lower than expectations for most categories when this question was last asked in January. Responses indicate a median expected increase of 3 to 4 percent for wages, down slightly from 4 to 5 percent from January, and of 4 to 5 percent for total compensation (wages plus benefits), unchanged from January.

Future Indicators Remain Weak

The diffusion index for future general activity rose 7 points but remained negative at -1.5 (see Chart 1). More than 32 percent of the firms expect decreases in future activity (up from 29 percent last month), compared with 31 percent that expect increases (up from 21 percent); 34 percent of the firms expect no change in future activity. The future new orders index rose 5 points to 9.8, and the future shipments index rose 6 points to 13.3. The future employment index ticked down 3 points to 3.8. Nearly 72 percent of the firms expect steady employment levels over the next six months, 14 percent of the firms expect higher employment, and 11 percent expect lower employment. The future capital expenditures indicator edged down from -3.8 to -5.4, its lowest reading since March 2009.

Summary

Responses to the April Manufacturing Business Outlook Survey suggest continued declines in regional manufacturing activity this month. The indicators for current activity, new orders, and shipments remained negative. The firms indicated overall steady employment and less widespread price increases. The survey’s broad indicators for future activity suggest that respondents’ expectations for growth over the next six months remain subdued.

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