Philly Fed’s Survey Improves, But Shows Activity Barely Growing

By March 21, 2013Economy

The Federal Reserve Bank of Philadelphia’s Business Outlook Survey indicated that manufacturing activity was growing in March for the first time since December. The composite index of general business conditions rose from -12.5 in February (a fairly steep contraction) to +2.0 in March (a very slight expansion). To the extent that this figure is once-again positive, that is a good thing. But, it also means that manufacturers are not experiencing much growth, with several of the key indicators just barely above the neutral point of zero.

For instance, the index for new orders increased from -7.8 to +0.5 in the month. In all, 51.5 percent of the respondents to this survey said that their sales levels were unchanged from the month before (which had declined for two straight months), with the rest almost evenly split between rising or declining new orders activity. This shows progress in that sales appear to have stabilized (in that they stopped falling), but beyond that, it is hardly a reflection of robust growth. Along those lines, the average employee workweek decreased significantly in March, with its index falling from -1.6 to -12.9. Only 6.5 percent of those taking the survey said that their workweek was longer, with just over 72 percent saying that it had not changed.

On the other hand, it was not all lackluster news. The pace of hiring picked up slightly, with the index for employment up from 0.9 to 2.7. In addition, shipments appeared to have accelerated in March. In each case, though, these data indicate sluggish growth in hiring and shipments.

In a series of special questions, manufacturers were asked about their capital spending plans for 2013. Overall, 39.4 percent plan to increase their capital spending in 2013, with 31.8 percent anticipating decreases. More respondents plan to increase than decrease their investments in non-computer equipment this year, with net declines expected for other areas of capital spending (e.g., software, computer hardware, structures, and energy-saving improvements). Of those planning to reduce their capital investments, the main factors were sales, already-low capacity levels, and the lack of a need to do so.

Meanwhile, the other forward-looking measures show cautious optimism in the months ahead, much as they have in past surveys. Manufacturers largely expect significantly higher levels of new orders and shipments in the next six months. Hiring and capital spending are also expected to grow, but each data point reflects some deceleration from February’s readings to modest-at-best levels of expansion. In addition, pricing pressures are expected to pick up.

Chad Moutray is chief economist, National Association of Manufacturers.


Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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