The Federal Reserve Bank of Philadelphia’s Business Outlook Survey found that manufacturers were experiencing mostly modest growth in its January report. The index of general business conditions were marginally higher, up from 6.8 in December to 7.3 in January. Much of the data for 2011 were revised after considering new seasonal adjustment factors. December was originally reported as 10.3, so it was revised downward.
While overall business conditions were modestly higher, many of the other components in the survey reflected some easing from the previous month. New orders, for instance, fell from 10.7 to 6.9. This suggests that, while new orders continue to advance, they are growing at a slower pace than before. Similar readings were observed for shipments.
Unfilled orders, delivery times and inventories experienced some contractions, however. Meanwhile, the number of employees remained virtually unchanged but expanding, with slightly more hours of work observed.
Looking ahead, respondents were quite optimistic on all of the key variables. The index for expected new orders rose from 44.1 to 49.7, suggesting strong growth predictions. Measures for shipments, employment and capital expenditures were also expected to grow rapidly, and prices for raw materials are expected to accelerate and remain elevated.
In a series of special questions, respondents were asked about factors influencing employment. The top reasons cited for adding workers included higher sales, easing an overworked staff, hiring workers with new skills and decreased economic/financial uncertainty. On the other hand, the top factors restraining hiring were a desire to reduce costs, weaker sales, uncertainty about regulations or other government policies, an inability to find qualified workers and rising health care costs.
Chad Moutray is chief economist, National Association of Manufacturers.
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