The Federal Reserve Bank of Philadelphia’s Business Outlook Survey rebounded strongly in June. The composite index of general business conditions swung from a modest contraction (-5.2) in May to decent growth (12.5) in June. With the exception of new hiring, many of the key indicators shifted to expansion, as well. For instance, the new orders index increased from -7.9 to 16.6, a large shift from month to month. Behind this figure, there was a large drop in those suggesting that their sales had decreased, down from 35.3 percent in May to 21.6 percent in June. That helps to explain the increase in confidence this month.
As noted, the employment measures continue to reflect some skittishness in hiring, at least for now. The index for the number of employees suggested that the pace of declines in hiring had eased this month, up from -8.7 to -5.4. One-in-five manufacturers surveyed said that they had decreased their employment from May, with 61.9 percent reporting no change.
On the inflationary front, respondents noted a pickup in pricing pressures in June, with the index for the prices paid for raw materials up from 6.9 to 22.5. While two-thirds of those taking the survey said that their input costs were flat, there were 28.2 percent who said that these prices had risen.
Moving ahead, manufacturers continue to be cautiously optimistic about future growth. Over half of the respondents expect to have increases in new orders and shipments, and the forward-looking composite index edged higher from 32.3 to 33.7. The good news is that employment and capital spending plans are also expected to be higher, with roughly one-third of respondents planning both new hires and increased investments.
Chad Moutray is the chief economist, National Association of Manufacturers.
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