Tag: Business outlook Survey

Philly Fed: Manufacturing Activity Expanded at Fastest Pace in Over 3 Years

The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded at its fastest pace in over three years (March 2011). The Business Outlook Survey’s composite index of general business activity increased from 17.8 in June to 23.9 in July. The shift stemmed largely from a drop in the percentage of manufacturers in the Philly Fed district who said that conditions had worsened, down from 18.6 percent to 8.9 percent. This helped to push the overall diffusion index higher in July, with roughly one-third of the respondents noting improvements for the month in overall conditions.

The pace of new orders (up from 16.8 to 34.2) and shipments (up from 15.5 to 34.2) were both up significantly in this report. Hiring (up from 11.9 to 12.2) and the average employee workweek (up from 7.3 to 12.5) continued to move in the right direction. One downside was elevated costs for raw materials, with nearly 36 percent of those taking the survey saying that input costs were increased in the month.

Over the course of the next six months, manufacturers in Philly Fed district were overwhelmingly upbeat about future activity. In fact, 56.1 percent of survey respondents said that they anticipate increased sales, and 60.4 percent predict higher shipment levels. Moreover, even as the indices edged a bit lower in July, roughly one-third of those completing the survey said that they planned to add workers and over one-quarter were going to increase their capital expenditures in the next six months.

In a couple special questions, 38.6 percent of manufacturing respondents noted increased exports over the past year, with just 7.0 percent saying that they had moderate decreases. The region exported mainly intermediate products (39.6 percent), with final business products (24.5 percent), capital goods (18.9 percent) and final consumer products (11.3 percent) also important components.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Philly Fed: Manufacturing Activity Expanded Strongly in June

The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded strongly in June, extending the spring rebound in the region. The Business Outlook Survey’s composite index of general business activity increased from 15.4 in May to 17.8 in June, averaging 16.6 over the past three months. The underlying numbers were mostly positive. There were faster rates of growth for new orders (up from 10.5 to 16.8), shipments (up from 14.2 to 15.5), hiring (up from 7.8 to 11.9), and the average workweek (up from 2.9 to 7.3). Over 39 percent of respondents said that new orders were higher in the month, up from 34.8 percent in the prior survey.

Pricing pressures remain elevated, with raw material costs continuing to edge higher. The index for prices paid rose from 23.0 to 35.0, with 36.2 percent of those taking the survey suggesting that input costs had increased in June. Just over 60 percent said that raw material prices were unchanged, with just 1.2 percent indicating a decline. Moving forward six months, 44.5 percent anticipate their costs to rise, with none expecting them to fall. For the most part, this mirrors the recent producer price index data which has shown core inflation picking up somewhat.

Looking toward the second half of 2014, manufacturers in the Philly Fed district were mostly upbeat. In a special question on production expectations, 73.9 percent of respondents said that they anticipate increased production in the coming months, with nearly 48 percent predicting output growth of more than 4 percent. This corresponds with 59.7 percent who predict increased new orders over the next 6 months.

Employment growth is also expected to increase, but with some mixed news overall. The good news is that 29.0 percent say that they plan to hire additional workers in a special question. Yet, that figure is slightly dwarfed by those who do not indent to hire but plan to increase output through productivity gains (27.5 percent) or more hours for existing staff (11.6 percent). This suggests that firms remain slightly hesitant about adding to their workforce, even as we have seen progress of late on the employment front.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Philly Fed: Manufacturers Continue to Expand Strongly in May

The Federal Reserve Bank of Philadelphia said that manufacturing activity continued to expand strongly in May, albeit at a slightly slower pace than in April. The Business Outlook Survey’s composite index of general business activity decreased a bit from 16.6 in April to 15.4 in May. There were also some easing in growth rates for new orders (down from 14.8 to 10.5) and shipments (down from 22.7 to 14.2). Despite the slight deceleration, over one-third of the survey respondents said that new orders were higher in the month, and the composite index has averaged 13.7 from March to May, matching the average for the second half of 2013.

The labor market variables were mixed. Hiring growth (up from 6.9 to 7.8) accelerated modestly. Whereas, the average employee workweek (down from 5.0 to 2.9) narrowed somewhat. In a series of special questions, roughly one-third of manufacturers in the Philly Fed region that they had significant labor shortages, with 45.7 percent citing skills mismatches with their needs. In terms of how they addressing the skills gap, the top actions include: increasing recruitment efforts (65.7 percent), providing additional training to existing staff (55.7 percent), partnering with educational institutions to align curriculum to talent needs (38.6 percent), increasing wages (34.3 percent), and expanding recruitment outside the region (25.7 percent).

Looking ahead six months, manufacturers in the Philadelphia Fed district were more upbeat in May, with the forward-looking composite index increasing from 26.6 to 37.4. Over half of those taking the survey said that they expect new orders and shipments to increase in the coming months, 30.5 percent plan to add new workers, and 32.5 percent expect to spend more on capital investments. Still, it is notable that more than half of respondents anticipate keeping their employment and capital spending levels unchanged. Regarding pricing pressures, 36.5 percent anticipate raw material costs moving higher, with 59.0 percent expecting them to be unchanged.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Philly Fed Reported a Rebound in Manufacturing Activity in March

The Federal Reserve Bank of Philadelphia said that manufacturing activity rebounded in March from weather-related weaknesses the month before. The Business Outlook Survey’s composite index of general business activity shifted from contraction in February (-6.3) to a decent expansion in March (9.0). The percentage of respondents who said that conditions had worsened fell from 31.4 percent in February to 24.2 in March, with one-third of those taking the survey saying that business was better in the latest month.

Taking the February data out of the analysis, manufacturers have been positive in their outlook since June, mirroring the upturn that we have seen in the national economy in the second half of last year. The average composite index measure over the past 10 months (including February) was 10.9, suggesting that manufacturers in the Philly Fed region have continued to grow at a pretty reasonable rate.

In March, the index for new orders increased from -5.2 to 5.7, with 31.8 percent of respondents saying that their sales were higher in the month. This was up from 23.9 percent who said the same thing in February. Similar findings were observed for shipments (up from -9.9 to 5.7) and the average workweek (up from -7.0 to 3.1). One area where there was a bit of weakness was hiring. The pace of employment growth eased slightly (down from 4.8 to 1.7), but remained positive. Two-thirds of manufacturers completing the survey said that their employment levels were unchanged.

Fortunately, the manufacturing community in the Philadelphia Fed district remains mostly positive about the coming months. Nearly half of them said that they expect sales and shipments to be higher six months from now, with just over one-third expecting to add workers and increase capital spending.

Moreover, when asked about capital expenditures for 2014, manufacturers mostly anticipated increased levels of spending on non-computer equipment (a net percentage of 17.1 percent), software (14.3 percent), computer and related hardware (12.9 percent), structures (5.7 percent), and energy-saving equipment (2.9 percent). Half of the respondents said that they would increase capital spending because of the pickup in sales, with the need to replace outdated capital equipment (47.1 percent) and information technology equipment (41.2 percent) closely following.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Philly Fed: Manufacturing Activity Has Now Expanded for Eight Straight Months

The Federal Reserve Bank of Philadelphia said that manufacturing activity has now expanded for eight straight months. The Business Outlook Survey’s composite index of general business activity rose from 6.4 in December to 9.4 in January. Historical data points were revised to reflect new seasonal adjustments, including the December data. The bottom line was the fact that manufacturers have noted positive growth since contracting in May.

With that said, the pace of sales growth slowed in this report to its slowest pace since May. The index for new orders dropped from 12.9 to 5.1. Still, one should not over interpret this decline, as the average of this index from September to December was 17.9. This suggested strong growth over that time frame, with January’s sales extending those gains. Over one-quarter of manufacturing respondents said that their new orders had increased in January.

Shipments (up from 11.9 to 12.1) and hiring growth (up from 4.4 to 10.0) both moved in the right direction. Nearly one-third of those taking the survey noted rising shipments for the month, with 20.6 percent saying that their shipments had declined. In contrast to these figures, the average employee workweek (down from 4.8 to -5.3) and inventory growth (down from 16.0 to -19.6) both shifted into contractionary territory. Nonetheless, on both of these measures, roughly 60 percent of the responses were neutral.

The other key headline is the fact that manufacturers in the Philly Fed region continue to be mostly upbeat about 2014. In a special question on employment, 41.1 percent of respondents said that they plan to increase hiring this year, with just 9.6 percent planning reductions. The top factors that are restraining hiring were: (1) firm wants to keep operating costs low, (2) expected growth of sales is low, (3) firm cannot find workers with required skills, and (4) there is uncertainty about the cost of health insurance.

Along those lines, over half expect new orders to increase over the coming six months, and 24.0 percent anticipate more capital spending. There was some easing in optimism from the December survey in a few of these measures, but the overriding trend is one that is mostly positive. Nonetheless, inventories stockpiles are anticipated to shrink marginally, and pricing pressures are predicted to accelerate.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Manufacturing Activity Surged in the Philadelphia Fed District in September

The Federal Reserve Bank of Philadelphia reported a sharp increase in manufacturing activity in September. The Business Outlook Survey’s composite index of general business activity surged from 9.3 in August to 22.3 in September. This was the fastest pace since March 2011 and was more than double the consensus expectation. In general, this measure has been highly volatile over the course of this year, making it harder to interpret, with index values ranging from -12.5 in January to the 22.3 reading of September. This was the fourth consecutive month of expansion, with the composite index being 12.5, 19.8, 9.3, and 22.3 in the four months from June forward.

Stronger sales and shipments data were behind the higher composite index value. The new orders index increased from 5.3 in August to 21.2 in September. Behind these figures, it is instructive to see how the responses were different between the two months. Respondents saying that their orders had increased from the previous month rose from 27.7 percent to 38.5 percent; while at the same time, those reporting a decrease in sales for the month declined from 22.4 percent to 17.3 percent. This indicates a nice pickup in new orders, boosting confidence and many of the other data figures. At the same time, it is worth noting that just over 40 percent had sales levels that were unchanged, down from roughly half last time.

The positivity was fairly broad-based, with indices for shipments (up from -0.9 to 21.2), employment (up from 3.5 to 10.3), and the average workweek (up from -2.6 to 12.2) all higher. The news of increased hiring is welcome, but it is also tempered by the fact that 68.3 percent have made no changes to their employment levels.

Moving forward, 56.3 percent of manufacturers in the Philly Fed region expect production to be higher in the third quarter relative to the second quarter, with an average growth rate of 1.6 percent. There is slightly less optimism for the fourth quarter, with 43.8 percent anticipating increased output. Overall, respondents to this survey are cautiously optimistic about the next six months. Over 60 percent predict rising new orders, and over one-third expect to add some more employees. Capital spending plans are also a bit higher, with 36.3 percent planning to increase their investments over the next six months, up from 27.9 percent in August.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Manufacturing Activity Growth Eases in the Philadelphia Fed District in August

The Federal Reserve Bank of Philadelphia reported that manufacturing activity eased in August. The Business Outlook Survey’s composite index of general business activity dropped from 19.8 in July to 9.3 in August. On the one hand, this suggests that the sharp increase in sentiment observed last month has moderated a bit, which might be expected. That index reading had been the fastest pace since March 2011, for instance, and June and July’s healthy gains followed much weaker data from January to May. With that said, it is also clear that there remain some pockets of softness in activity.

For instance, shipments contracted slightly in August, with its index reading down from 14.3 to -0.9. The shift occurred mostly because 38.0 percent had said that shipments were higher in July, but only 26.0 percent said the same thing in August. The majority of that difference went into the “no change” category.  Likewise, new orders declined from 10.2 to 5.3. While this still suggests modest gains in sales for the month, the percentage of respondents reporting increased new orders declined from 35.1 percent in July to 27.7 percent in August. Almost half said that their orders were flat.

Looking at the other August data, inventory reductions declined at a slower rate (up from -21.6 to -11.3), and pricing pressures decelerated somewhat (down from 21.5 to 17.3). On the employment front, the pace of hiring slowed (down from 7.7 to 3.5), with 65.0 percent of respondents saying that their hiring had not changed. On the negative side, the average employee workweek was modestly lower, down from 6.6 to -2.6. The percentage of manufacturers with a longer average workweek dropped from 21.5 percent in July to 16.4 percent in August, helping to explain this shift.

The good news is that manufacturers continue to be cautiously optimistic about the next 6 months, with some deceleration in sentiment reported in this survey. The forward-looking composite index declined from 44.9 to 38.9. Yet, over half of respondents anticipate increased new orders and shipments ahead, and more than one-quarter expect to hire additional workers and invest in more capital spending. As such, even with the easing, manufactures in the Philly Fed region remain fairly upbeat about the second half of this year.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Manufacturing Activity Improves in December in Philly Region

The Federal Reserve Bank of Philadelphia’s Business Outlook Survey observed improvement in December. The composite index of general business activity increased from -10.7 in November to 8.1 in December, only the second time in eight months that this index has been positive. It is important to note, as well, that November’s reading was adversely affected by Hurricane Sandy and slowdowns in production. This suggests that manufacturers in the district have rebounded from those impacts.

Stronger sales growth was behind these figures, as well. The index of new orders rose from -4.6 to 10.7, with almost 32 percent suggesting that orders were higher in December than the month before. Given that November’s report mostly showed contractions across-the-board, there was progress in most of the measures this time, with only inventory growth and delivery times still negative. Stronger growth was seen in shipments, employment, and the average workweek. Looking ahead six months, capital spending plans were also higher, as were expectations for manufacturing activity.

Almost half of the respondents anticipate raw material prices to increase, with roughly 41 percent suggesting no change in the prices they pay for inputs. In a series of special questions, manufacturers said that they expect energy costs to rise 0.8 percent on average, with other raw materials up 2.6 percent. They also anticipate wages and health benefits to rise 2.1 percent and 7.2 percent, respectively.

In general, the December survey indicates that manufacturing activity has picked up in the Philadelphia region, with modest growth expected in the coming year. Overall, though, the district’s production has been choppy at best over the course of the second half of 2012, with at least part of the progress in December stemming from the rebound in activity after Hurricane Sandy. Growth in the months ahead will hinge on moving on from the current economic uncertainties present in the larger macroeconomic picture, even as respondents to this survey were more upbeat about their prospects for the next six months.

Chad Moutray is the chief economist, National Association of Manufacturers.

 

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