Manufacturing conditions in the region contracted modestly this month,
according to firms responding to the January Manufacturing Business Outlook
Survey. The indicator for general activity remained negative this month;
however, it rebounded from a lower reading in December. Other indicators offered
mixed signals: Shipments increased this month, but new orders and employment
declined modestly. The survey’s price indexes suggest continued downward
pressure on manufacturing prices. With respect to the manufacturers’ forecasts,
nearly all the survey’s future indicators showed continued weakening this month
while remaining positive.
Most Current Indicators Suggest Weak Activity
The diffusion index for current activity increased from a revised reading of
-10.2 in December to -3.5 and has now been negative for five consecutive
months.* The index for current new orders remained negative but increased
10 points, to -1.4. Firms reported an increase in shipments to begin the new
year: The shipments index increased 12 points, its first positive reading in
four months. Firms reported continued declines in inventories: The inventories
index remained negative and decreased 10 points. Firms’ backlog of unfilled
orders also declined this month, and delivery times were shorter, according to
the responding firms.
The survey’s labor market indicators suggest weaker employment. The employment
index decreased 4 points, from 2.2 to -1.9. Nearly 69 percent of the firms
reported no change in employment this month, and the percentage reporting
decreases (16 percent) was slightly larger than the percentage reporting
increases (14 percent).
Firms Still Report Downward Price Pressures
Most firms (76 percent) reported no changes in the prices for their own
manufactured products this month. The percentage of firms reporting lower prices
(13 percent) was slightly greater than the percentage reporting higher prices
(10 percent). Although the current prices received index increased from -8.5 to
-2.8, the index has recorded seven consecutive negative readings. Firms
reported, on balance, declines in the prices paid for inputs. The percentage of
firms reporting lower input prices (18 percent) was greater than the percentage
of firms reporting higher input prices (17 percent). The prices paid index
increased 7 points but remained negative for the fifth consecutive month.
Future Indexes Continue to Slide
The diffusion index for future general activity fell from a revised reading of
24.1 to 19.1 this month. The index has trended down since last summer and is now
at its lowest reading since November 2012. The largest share of firms expects
an increase in activity over the next six months (43 percent), but 24 percent
expect declines. The future indexes for new orders and shipments also
deteriorated this month, decreasing 13 points and 15 points, respectively.
Firms’ forecasts for future employment have been modest during the past few
months. The future employment index fell from 7.0 in December to 5.5 this month,
the lowest reading since November 2012.
Energy Price Reductions Are Positive Overall
In this month’s special questions, firms were asked about the effects of lower
energy prices on manufacturing business. The responses indicate that the net
effects have been positive but that a large share of firms reported negative
impacts from decreased demand from energy-producing customers. Nearly
51 percent of the firms reported overall positive effects from lower energy
prices, while 30 percent reported negative effects. The largest percentage
(33 percent) characterized the effect as slightly positive. Over 41 percent of
the firms cited that falling energy prices had lowered the costs of production,
but nearly the same percentage of firms (42 percent) said the lower prices had
decreased demand from energy production–related customers. For 22 percent of
the firms, energy cost reductions were increasing sales margins, but on the
negative side, 22 percent indicated that the lower energy costs had reduced
revenues. With regard to their own expectations for energy prices over the next
six months, firms were evenly divided about whether their forecasts for energy
prices would increase (32 percent) or decrease (30 percent) demand. About the
same percent (30 percent) said demand would not be affected.
Weakness in regional manufacturing conditions continued this month, according
to firms responding to the January survey. While indexes for current general
activity and new orders remained negative, the indexes increased from lower
readings at the end of last year. Firms reported an increase in shipments this
month but a modest decrease in employment. Indicators for future conditions
remained positive overall but suggested a continuing deterioration in confidence
about manufacturing growth for the first half of 2016.
* The survey’s annual historical revisions, which incorporate new seasonal
adjustment factors, were released on January 14, 2016. The full set of revised
historical data is available at
Special Questions (January 2016)
1. Overall, what impacts have falling energy prices had on your business?
Percent of Respondents Subtotals
Strongly positive 2.9% Positive
Modestly positive 14.5% 50.7%
Slightly positive 33.3%
Slightly negative 11.6% Negative
Modestly negative 4.3% 30.4%
Strongly negative 14.5%
2. Impacts of changing energy prices manifest themselves in multiple ways.
Falling energy prices have:*
Decreased demand from our
energy production–related customers 42.0%
Increased demand from our
nonenergy production–related customers 4.3%
Lowered our firm’s cost of production 40.6%
Lowered our firm’s revenues 21.7%
Increased our sales margins 21.7%
Decreased our sales margins 10.1%
Had no effect 23.2%
3. Based on your assumptions about energy prices for the next six months, you
expect overall demand for your products to:
Decrease significantly 4.3% Decrease
Decrease modestly 15.9% 30.3%
Decrease slightly 10.1%
Be unaffected 30.4%
Increase slightly 20.3% Increase
Increase modestly 11.6% 31.9%
Increase significantly 0.0%
* Percentages do not add up to 100 percent because individual firms selected
Summary of Returns
January vs. December Six Months from Now
Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff.
Index Index Index Index
General Business -10.2 26.7 37.5 30.2 -3.5 24.1 43.4 27.8 24.3 19.1
New Orders -11.1 29.3 39.3 30.7 -1.4 34.5 40.9 36.0 19.8 21.1
Shipments -2.1 35.6 37.0 25.9 9.6 36.6 42.9 32.5 20.9 22.0
Unfilled Orders -17.6 15.9 58.5 24.7 -8.8 7.4 16.5 62.9 16.0 0.5
Delivery Times -6.1 7.8 76.5 15.4 -7.6 -2.3 5.7 76.8 12.2 -6.5
Inventories -5.7 17.9 45.3 33.6 -15.7 -1.7 23.4 49.8 21.9 1.5
Prices Paid -8.3 16.6 64.5 17.7 -1.1 26.0 27.5 59.3 8.7 18.8
Prices Received -8.5 10.3 76.0 13.1 -2.8 15.0 20.4 63.0 10.3 10.1
Number of Emp. 2.2 13.7 68.6 15.7 -1.9 7.0 19.9 61.7 14.3 5.5
Avg. Emp. Wrkwk. 0.6 19.4 58.7 21.6 -2.2 0.2 17.7 62.3 15.6 2.1
Capital Ex. -- -- -- -- -- 10.7 24.4 51.7 15.1 9.4
Notes: (1) Items may not add to 100 percent because of omission by respondents.
(2) All data are seasonally adjusted.
(3) Diffusion indexes represent the percentage of respondents indicating
an increase minus the percentage indicating a decrease.
(4) Survey data reflect information received through January 18, 2016.