December 2019 Manufacturing activity in the region was flat this month, according to results from the December Manufacturing Business Outlook Survey. The survey's broad indicator for current activity dropped to a reading near zero this month, although indicators for new orders, shipments, and employment remained at higher positive readings. The survey's future activity indexes remained positive, suggesting continued optimism about growth for the next six months. Changes in Current Indicators Were Mixed This Month The diffusion index for current general activity fell 10 points this month to 0.3, its lowest reading in six months. The percentage of firms reporting increases was equal to the percentage reporting decreases (29 percent). The indexes for current shipments and new orders moved higher: The current new orders index increased 1 point, while the shipments index increased 6 points. Both the unfilled orders and delivery times indexes remained positive this month, suggesting higher unfilled orders and slower delivery times. Manufacturers continued to report expanding employment this month, although the current employment index decreased 4 points to 17.8. Nearly 19 percent of the firms reported higher employment, while only 1 percent reported lower employment. The average workweek index remained positive and edged up 2 points. More Firms Reported Input Price Increases This Month The firms continued to report overall increases in the prices paid for inputs, with the index rising 11 points to 19.0. Over 25 percent of the respondents reported higher input prices, up from 17 percent in November. The current prices received index, reflecting the manufacturers' own prices, ticked down to a reading of 11.9. Over 80 percent of the firms reported no change in their own product prices this month. Firms Expect Highest Cost Increases for Health Benefits In this month's special questions, the firms were asked about their expectations for changes in various input and labor costs for the coming year. The median expected increase for wages was 2.5 percent, for health benefits costs was 4.5 percent, and for nonhealth benefits costs was 2.5 percent. Median growth in total wage compensation costs (wages plus benefits) was forecast to be 3.5 percent. The costs of raw materials and intermediate goods are expected to increase 1.5 percent, and energy costs were forecast to be unchanged. The firms were also asked how the expected cost increases for 2020 will compare with this year's cost changes. For all categories of expenses, the firms forecast, on balance, increases greater than in 2019. Firms Remain Generally Optimistic The diffusion index for future general activity edged down 1 point to 35.2. Nearly 43 percent of the firms expect increases in activity over the next six months, while 8 percent expect declines. The future new orders index decreased 5 points, and the future shipments index decreased 2 points. The future employment index increased 5 points this month, and the firms remain optimistic about future hiring overall: Nearly 41 percent of the firms expect higher employment over the next six months. The firms were more optimistic about future capital spending this month: The future capital spending index increased 8 points. Summary The December Manufacturing Business Outlook Survey indicated essentially flat growth in the region's manufacturing sector this month. Although they all remained positive, the indicators for general activity and employment declined, while the indicators for new orders and shipments edged higher. The survey's future indexes indicate that respondents continue to expect growth over the next six months. Special Questions (December 2019) 1. What percentage change in costs do you expect for the following categories in 2020? Energy Other Inter- Wages Health Non- Wages + (%) Raw mediate (%) Benefits health Health Materials goods (%) Benefits Benefits + (%) (%) (%) Nonhealth Benefits (%) Decline of more than 4% 1.7 0.0 0.0 0.0 1.7 0.0 0.0 Decline of 3-4% 1.7 1.8 0.0 0.0 0.0 0.0 0.0 Decline of 2-3% 1.7 1.8 0.0 0.0 0.0 0.0 1.7 Decline of 1-2% 8.5 3.5 1.7 0.0 1.7 0.0 0.0 No change 37.3 22.8 20.7 8.5 20.3 32.2 8.6 Increase of 1-2% 25.4 22.8 31.0 5.1 6.8 11.9 8.6 Increase of 2-3% 18.6 22.8 27.6 47.5 6.8 27.1 24.1 Increase of 3-4% 3.4 17.5 17.2 37.3 5.1 18.6 19.0 Increase of 4-5% 1.7 1.8 1.7 1.7 16.9 6.8 22.4 Increase of 5-7.5% 0.0 1.8 0.0 0.0 18.6 3.4 5.2 Increase of more than 7.5% 0.0 3.5 0.0 0.0 22.1 0.0 10.2 ------------------------------------------------------------------------------- Median Exp.Change 0.0 1.5 1.5 2.5 4.5 2.5 3.5 Average Exp.Change 0.7 1.9 1.8 2.6 4.9 2.0 4.1 2. How do these expected cost changes compare with those in 2019? Higher 10.7 33.9 26.4 42.9 35.7 14.3 46.4 Same 80.4 51.8 69.8 53.6 57.1 85.7 51.8 Lower 8.9 14.3 3.8 3.6 7.1 0.0 1.8 ------------------------------------------------------------------------------- Diffusion Index (Higher Minus Lower) 1.8 19.6 22.6 39.3 28.6 14.3 44.6 *The firms responded to more detailed changes than shown in the provided ranges. Percentages may not add to 100 percent because some reporters did not answer all questions. Summary of Returns December 2019 December vs. November Six Months from Now vs. December Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 10.4 29.4 40.7 29.1 0.3 35.8 42.7 38.5 7.5 35.2 Conditions New Orders 8.4 34.4 38.6 25.0 9.4 40.3 49.9 31.5 14.3 35.6 Shipments 9.8 33.5 47.7 17.5 15.9 41.4 53.1 29.1 14.2 39.0 Unfilled Orders 6.0 22.9 64.5 12.5 10.4 13.2 25.5 58.4 10.8 14.7 Delivery Times 8.5 21.7 66.3 11.1 10.6 7.3 9.5 74.7 13.8 -4.2 Inventories -4.6 23.5 55.5 17.4 6.1 6.9 24.6 51.4 18.3 6.3 Prices Paid 7.8 25.2 68.6 6.1 19.0 43.2 51.7 44.9 0.8 50.9 Prices Received 12.2 14.4 80.3 2.5 11.9 36.7 49.3 50.7 0.0 49.3 Number of Emp. 21.5 18.7 80.4 0.9 17.8 24.0 40.6 45.7 12.0 28.6 Avg. Emp. Wrkwk. 5.2 19.6 68.5 11.9 7.7 14.8 31.2 55.1 12.1 19.1 Capital Ex. -- -- -- -- -- 19.4 34.1 58.0 6.5 27.6 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through December 16, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: December 19, 2019, at 8:30 a.m. ET. November 2019 Manufacturing activity in the region continued to grow, according to results from the November Manufacturing Business Outlook Survey. The survey’s broad indicators remained positive, although their movements were mixed this month: The indicator for general activity increased, but the new orders, shipments, and employment indicators decreased from their readings last month. The survey's future activity indexes remained positive, suggesting continued optimism about growth for the next six months. Current Indicators Suggest Overall Growth The diffusion index for current general activity rose 5 points this month to 10.4, after decreasing 6 points in October. The percentage of firms reporting increases (30 percent) this month exceeded the percentage reporting decreases (20 percent). The indexes for current shipments and new orders both fell: The current new orders index decreased 18 points, while the shipments index decreased 9 points. Both the unfilled orders and delivery times indexes remained positive this month, suggesting higher unfilled orders and slower delivery times. The firms reported overall increases in manufacturing employment this month, but the current employment index decreased 11 points to 21.5. Nearly 27 percent of the firms reported higher employment, compared with 34 percent last month. Over 5 percent of the firms reported decreases in employment this month, while 68 percent reported no change. The average workweek index also decreased but remained positive. Price Indexes Suggest Softening in Prices The firms continued to report overall increases in prices paid for inputs and received for goods, but the indicators for both measures declined for the second consecutive month. The prices paid diffusion index decreased 9 points to 7.8, its lowest level since March 2016. The percentage of firms reporting increases in input prices (17 percent) remained higher than the percentage reporting decreases (9 percent). The current prices received index, reflecting the manufacturers' own prices, decreased 4 points to a reading of 12.2. Firms Expect Own Prices to Rise Faster Than Inflation In this month's special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms' median forecast was for an increase of 2.5 percent, higher than the 2.0 percent that was forecast when the same question was last asked in August. The firms' actual price change over the past year was 2.0 percent, down from 2.5 percent in the prior quarter. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms' median forecast was unchanged at 2.0 percent. The firms' median forecast for the long-run (10-year average) inflation rate increased from 2.2 percent to 2.5 percent. Firms Remain Generally Optimistic The diffusion index for future general activity rose 2 points to 35.8 after increasing 13 points in October. Nearly 52 percent of the firms expect increases in activity over the next six months, while 16 percent expect declines. The future new orders index held steady, while the future shipments index decreased 2 points. The future employment index rose 2 points from the previous month, as firms remained optimistic about future hiring: Thirty-seven percent of the firms expect higher employment over the next six months. The firms were less optimistic about future capital spending this month: The future capital spending index decreased 17 points to its lowest reading in three years. Summary Responses to the November Manufacturing Business Outlook Survey suggest growth in manufacturing activity this month. The general activity index showed improvement this month, but the indicators for new orders, shipments, and employment decreased from last month’s readings. The survey's future indexes indicate that respondents continue to expect growth over the next six months. Special Questions (November 2019) Please list the annual percent change with respect to the following: Current Previous (August 2019) For your firm: Forecast for next year (2019Q4–2020Q4) 1. Prices your firm will receive (for its own goods and services sold). 2.5 2.0 2. Compensation your firm will pay per employee (for wages and benefits). 3.0 3.0 Last year's price change (2018Q4–2019Q4) 3. Prices your firm did receive (for its own goods and services sold) over the last year. 2.0 2.5 For U.S. consumers: 4. Prices consumers will pay for goods and services over the next year. 2.0 2.0 5. Prices U.S. consumers will pay for goods and services over the next 10 years (2019–2028). 2.5 2.2 The numbers represent medians of the individual forecasts (percent changes). For question 5, the firms reported a 10-year annual-average change. Summary of Returns November 2019 November vs. October Six Months from Now vs. November Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 5.6 30.3 48.0 19.9 10.4 33.8 51.9 25.8 16.1 35.8 Conditions New Orders 26.2 32.0 44.4 23.6 8.4 39.9 60.0 15.7 19.7 40.3 Shipments 18.9 29.2 51.0 19.4 9.8 42.9 61.9 16.8 20.5 41.4 Unfilled Orders 18.8 16.3 73.5 10.2 6.0 13.3 25.0 59.9 11.9 13.2 Delivery Times 8.0 15.3 77.8 6.9 8.5 0.2 17.0 69.2 9.7 7.3 Inventories 6.6 11.7 67.6 16.4 -4.6 2.0 26.0 50.7 19.2 6.9 Prices Paid 16.8 16.5 72.8 8.6 7.8 36.2 48.2 43.5 5.1 43.2 Prices Received 16.4 17.7 74.0 5.6 12.2 29.7 41.8 51.4 5.2 36.7 Number of Emp. 32.9 26.6 67.8 5.1 21.5 22.4 37.0 46.9 13.0 24.0 Avg. Emp. Wrkwk. 10.8 16.6 70.5 11.4 5.2 12.5 25.5 60.1 10.7 14.8 Capital Ex. -- -- -- -- -- 36.4 27.9 56.8 8.4 19.4 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through November 18, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: November 21, 2019, at 8:30 a.m. ET. October 2019 Manufacturing activity in the region continued to grow, according to results from the October Manufacturing Business Outlook Survey. The survey's broad indicators remained positive, although their movements were mixed this month: The general activity and shipments indicators decreased from their readings last month, but the indicators for new orders and employment increased. The survey’s future activity indexes remained positive, suggesting continued optimism about growth for the next six months. Changes in Current Indicators Were Mixed This Month The diffusion index for current general activity fell 6 points this month to 5.6, after decreasing 5 points in September. The percentage of firms reporting increases (27 percent) this month narrowly exceeded the percentage reporting decreases (21 percent). Movements in the indexes for current shipments and new orders were mixed: The current new orders index increased 1 point, while the shipments index decreased 8 points. Both the unfilled orders and delivery times indexes remained positive this month, suggesting higher unfilled orders and slower delivery times. The firms reported an expansion of manufacturing employment this month, and the current employment index increased 17 points to 32.9. Over 34 percent of the firms reported higher employment, while only 2 percent reported lower employment. The average workweek index remained positive but edged down 2 points. Price Indexes Suggest Price Pressures Moderated The firms continued to report overall increases in the prices paid for inputs, but the prices paid index fell 16 points to 16.8. Nearly 24 percent of the respondents reported higher input prices, down from 38 percent in September. The current prices received index, reflecting the manufacturers’ own prices, decreased 4 points to a reading of 16.4. Total Capital Spending Expected to Increase Next Year For this month’s special questions, manufacturers were asked about current capacity utilization rates. The average capacity utilization rate reported among the responding firms was 76.9 percent, near the most recent estimate for the U.S. manufacturing sector. The firms were asked to forecast total capital spending for 2020 compared with levels in 2019, and more firms indicated that they would increase spending (39 percent) than decrease spending (20 percent). The firms were also asked about their plans for different categories of capital spending next year. For all categories of investment spending, the percentage of firms expecting to increase total capital spending was higher than the percentage expecting to decrease spending. The category with the largest share of firms increasing spending was noncomputer equipment (41 percent). The firms were also asked about the impact of trade policy on their plans. On balance, the firms indicated net negative effects: Eighteen percent of the firms indicated decreases in spending plans because of trade policy. Firms Remain Generally Optimistic The diffusion index for future general activity increased 13 points to 33.8, after decreasing 12 points in September. Over 43 percent of the firms expect increases in activity over the next six months, while 9 percent expect declines. The future new orders index increased 5 points, and the future shipments index increased 2 points. The future employment index fell 8 points this month, but the firms remain overall optimistic about future hiring: Thirty-two percent of the firms expect higher employment over the next six months. The firms were more optimistic about future capital spending this month: The future capital spending index increased 11 points. Summary Responses to the October Manufacturing Business Outlook Survey suggest growth in manufacturing activity this month. Although they remained positive, the indicators for general activity and shipments fell from their levels in September. The firms reported an improvement in both new orders and employment this month. The survey’s future indexes indicate that respondents continue to expect growth over the next six months. Special Questions (October 2019) 1. Which of the following best characterizes your plant’s current capacity utilization rate? Capacity Utilization Rate* % of Reporters Less than 60% 12.5 60%–70% 17.8 70%–80% 26.8 80%–90% 28.5 Greater than 90% 14.4 Average utilization rate 76.9 U.S. utilization rate** 76.2 2. Do you expect the following capital expenditure categories over the next year (2020) to be higher than, the same, or lower than in the current year? % of Reporters Higher Same Lower Diffusion Index Noncomputer equipment 41.1 44.6 14.3 26.8 Software 28.6 58.9 12.5 16.1 Energy-saving investments 21.3 68.1 10.6 10.7 Computer and related hardware 26.8 55.4 17.9 8.9 Structures 32.1 45.3 22.6 9.5 Total 39.1 41.3 19.6 19.5 3. How has trade policy (including tariffs) affected your expected capital spending for 2020 compared with 2019? % of Reporters Significantly increase 5.3 Modestly increase 8.8 % Reporting increase 14.1 No change 54.4 Modestly decrease 15.7 Significantly decrease 1.8 % Reporting decrease 17.5 No response 14.0 *The firms provided more specific rates of utilization than shown in the provided ranges. **Capacity Utilization: U.S. Manufacturing (NAICS) “Current” shows the rate for August 2019. Sources: Federal Reserve Board, Haver Analytics Summary of Returns October 2019 October vs. September Six Months from Now vs. October Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 12.0 26.8 52.0 21.2 5.6 20.8 43.2 44.8 9.4 33.8 Conditions New Orders 24.8 42.4 41.3 16.2 26.2 35.2 52.5 34.4 12.7 39.9 Shipments 26.4 39.2 40.0 20.3 18.9 41.3 54.1 32.2 11.1 42.9 Unfilled Orders 17.6 28.0 62.1 9.2 18.8 8.5 18.4 73.6 5.1 13.3 Delivery Times 11.6 16.7 74.7 8.7 8.0 2.6 12.7 70.6 12.5 0.2 Inventories 21.8 24.7 55.6 18.0 6.6 8.0 21.7 52.4 19.6 2.0 Prices Paid 33.0 23.7 69.5 6.8 16.8 48.7 45.8 40.1 9.7 36.2 Prices Received 20.8 20.5 73.2 4.1 16.4 36.3 38.4 49.0 8.6 29.7 Number of Emp. 15.8 34.4 61.0 1.5 32.9 30.6 32.0 53.6 9.6 22.4 Avg. Emp. Wrkwk. 13.0 23.0 63.2 12.1 10.8 5.3 21.3 66.0 8.8 12.5 Capital Ex. -- -- -- -- -- 25.9 42.1 49.1 5.7 36.4 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through October 14, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: October 17, 2019, at 8:30 a.m. ET. September 2019 Manufacturing activity in the region continued to expand this month, according to results from the September Manufacturing Business Outlook Survey. The survey's broad indicators remained positive, although their movements were mixed: The indexes for general activity and new orders fell, while the indexes for shipments and employment increased. The survey’s price indexes increased notably this month. The survey’s future general activity index moderated but continues to suggest growth over the next six months. Current Indexes Indicate Growth The diffusion index for current general activity fell 5 points this month to 12.0. Over 28 percent of the firms indicated an increase in activity, and 16 percent reported a decrease. The index for current new orders declined slightly, from 25.8 in August to 24.8 in September. The current shipments index, however, increased 7 points. Both the unfilled orders and delivery times indexes remained positive this month, suggesting higher unfilled orders and slower delivery times. The firms reported overall improvement in manufacturing employment this month. Nearly 25 percent of the firms reported higher employment, while 9 percent reported lower employment. The employment index increased 12 points, and the average workweek index increased 6 points. Survey Price Measures Rise This Month Price increases were more widespread this month. On the cost side, nearly 38 percent of the firms reported increases in the prices paid for inputs this month, up from 25 percent in August. The prices paid index increased 20 points to 33.0, its highest reading since December 2018. With respect to prices received for firms’ own manufactured goods, 26 percent of the firms reported higher prices, up from 16 percent in August. The diffusion index for prices received increased 8 points to 20.8, its highest reading since March. Modernization of Manufacturing Processes Is Most Cited Goal Among Firms In this month’s special questions, the firms were asked about spending plans related to achieving company growth. Modernization of manufacturing processes was the most frequently cited goal of capital spending (69 percent), followed by expansion of facilities (29 percent), and the launching of new units (24 percent). Still reporting notable percentages, fewer firms indicated other goals to achieve growth: internationalization (17 percent), the purchase of other companies’ assets (12 percent), and acquisition of other companies (12 percent). Joint venture goals were cited by only 5 percent of the respondents. The firms were also asked about how these same cited goals had changed over the past few years. Over 60 percent of the firms indicated that modernization has become more important, while only 2 percent indicated it is less important. The firms were evenly divided on the change in importance of expanding facilities (29 percent). The firms that indicated capital spending for facilities expansion and process modernization have become less important cited the following reasons: fewer profitable opportunities (19 percent), policy uncertainty, weaker economic conditions, and international trade policies (each cited by 17 percent of the respondents). Firms Remain Optimistic Overall The diffusion index for future general activity fell 12 points to 20.8. Over 37 percent of the firms expect increases in activity over the next six months, while 16 percent expect declines. The future new orders index decreased 9 points, and the future shipments index decreased 2 points. The firms remained optimistic about future hiring, and the future employment index increased 6 points. The firms also expect prices to move higher in the next six months: The future prices paid index increased 10 points, and the future prices received index increased 9 points. Summary Responses to the September Manufacturing Business Outlook Survey suggest continued expansion in manufacturing activity this month. The current activity and new orders indexes, however, moderated from their August readings. The firms reported continued increases in hiring. More firms also reported increases in prices this month. Although most future indexes moderated this month, the firms continue to expect increases in activity and employment over the next six months. Special Questions (September 2019) 1. Which of the following best characterizes your company’s spending plan goals with regard to achieving future growth?* Percentage of Respondents Indicating Goals Modernization of manufacturing processes 69.0 Expansion of manufacturing facilities 29.3 Launching of new units 24.1 Internationalization 17.4 Acquisition of another company 12.1 Purchase of other company assets 12.1 Joint ventures 5.1 Other 3.5 *Percentages do not sum to 100 because firms could choose more than one category. Over 98 percent of the surveyed firms answered the special questions. 2. Over the past few years, how have the above goals changed in importance? More Same Less Diffusion Important Importance Important Index† % % % Modernization of manufacturing processes 60.3 31.0 1.7 58.6 Expansion of manufacturing facilities 29.3 34.5 29.3 0.0 Launching of new units 31.0 29.3 19.0 12.1 Internationalization 17.2 44.8 13.8 3.4 Acquisition of another company 15.5 32.8 27.6 -12.1 Purchase of other companies’ assets 15.5 37.9 20.7 -5.2 Joint ventures 8.6 32.8 31.0 -22.4 Other 3.4 17.2 8.6 -5.2 †The diffusion index is computed as the percentage responding "more important" minus the percentage responding "less important." 3. For firms that indicated capital spending for expansion of facilities or the modernization of processes is "less important," which of the following are the reasons?‡ Percentage of Respondents Fewer profitable opportunities 19.0 Policy uncertainty 17.2 Weak economic conditions 17.2 International trade policies 17.2 Other 15.5 Regulations 12.1 Tax policies 1.7 ‡Only firms that responded "less important" to changed goals of modernization of manufacturing processes or expansion of manufacturing facilities in question 2 responded to this question, but percentages are for all reporters. Firms could choose more than one reason. Summary of Returns September 2019 September vs. August Six Months from Now vs. September Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 16.8 28.3 54.8 16.3 12.0 32.6 37.2 39.2 16.4 20.8 Conditions New Orders 25.8 38.4 47.2 13.7 24.8 44.1 47.3 39.4 12.1 35.2 Shipments 19.0 36.6 49.9 10.3 26.4 43.5 54.5 31.0 13.1 41.3 Unfilled Orders 9.1 24.3 69.0 6.7 17.6 8.0 18.2 70.4 9.7 8.5 Delivery Times 9.3 17.1 75.4 5.6 11.6 1.5 11.4 77.3 8.9 2.6 Inventories 8.7 30.5 59.3 8.7 21.8 11.0 21.2 60.0 13.2 8.0 Prices Paid 12.8 37.6 57.8 4.6 33.0 39.0 52.7 41.5 4.0 48.7 Prices Received 13.0 26.0 68.9 5.1 20.8 27.8 44.5 44.3 8.2 36.3 Number of Emp. 3.6 24.6 66.5 8.8 15.8 25.0 35.4 58.6 4.9 30.6 Avg. Emp. Wrkwk. 6.8 19.6 73.7 6.7 13.0 7.7 20.1 65.1 14.8 5.3 Capital Ex. -- -- -- -- -- 22.6 30.8 60.6 4.9 25.9 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through September 16, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: September 19, 2019, at 8:30 a.m. ET. August 2019 Manufacturing activity in the region continued to grow, according to results from the August Manufacturing Business Outlook Survey. The survey's broad indicators remained positive, although their movements were mixed this month: The general activity, shipments, and employment indicators decreased from their readings last month, but the indicator for new orders increased. The survey’s future activity indexes remained positive, suggesting continued optimism about growth for the next six months. Current Indexes Indicate Growth The diffusion index for current general activity fell 5 points this month to 16.8, after increasing 22 points in July. Movements in the indexes for current shipments and new orders were mixed: The current new orders index increased 7 points, while the shipments index decreased 6 points. Both the unfilled orders and delivery times indexes remained positive this month, suggesting higher unfilled orders and slower delivery times. The firms reported overall increases in manufacturing employment this month, but the current employment index decreased 26 points to 3.6, its lowest reading since November 2016. Nearly 25 percent of the firms reported higher employment, compared with 36 percent last month. Nearly 21 percent of the firms reported decreases in employment this month, up from 6 percent last month. The average workweek index also decreased but remained positive. Price Indexes Suggest Modest Price Pressures The firms continued to report increases in the prices paid for inputs. The percentage of firms reporting increases in input prices (25 percent) remained higher than the percentage reporting decreases (12 percent). The prices paid diffusion index decreased 3 points and remains well below readings over the past two and a half years. The current prices received index, reflecting the manufacturers’ own prices, increased 4 points to a reading of 13.0 but is also still well below readings of the past few years. Firms Expect Own Prices to Match the Rate of Inflation In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms’ median forecast was for an increase of 2.0 percent, lower than the 2.8 percent that was provided when the same question was last asked in May. The firms’ actual price change over the past year was 2.5 percent. The firms expect their employee compensation costs (wages plus benefits per employee) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 2.0 percent, a decrease from 2.5 percent in the previous quarter. The firms’ median forecast for the long-run (10-year average) inflation rate also decreased, from 2.5 percent to 2.2 percent. Firms Remain Generally Optimistic The diffusion index for future general activity fell 5 points to 32.6, after increasing 17 points in July. Over 46 percent of the firms expect increases in activity over the next six months, while 14 percent expect declines. The future new orders index decreased 2 points, while the future shipments index increased 2 points. The future employment index was essentially unchanged from the previous month, as firms remained optimistic about future hiring: Thirty-one percent of the firms expect higher employment over the next six months. The firms were less optimistic about future capital spending this month: The future capital spending index decreased 14 points to its lowest reading in five months. Summary Responses to the August Manufacturing Business Outlook Survey suggest growth in manufacturing activity this month. The new orders index, which reflects demand for manufactured goods, showed some improvement this month, but the indicators for general activity, shipments, and employment decreased from last month’s readings. The survey’s future indexes indicate that respondents continue to expect growth over the next six months. Special Questions (August 2019) Please list the annual percent change with respect to the following: Current Previous (May 2019) For your firm: Forecast for next year (2019Q3–2020Q3) 1. Prices your firm will receive (for its own goods and services sold). 2.0 2.8 2. Compensation your firm will pay per employee (for wages and benefits). 3.0 3.0 Last year's price change (2018Q3–2019Q3) 3. Prices your firm did receive (for its own goods and services sold) over the last year. 2.5 – For U.S. consumers: 4. Prices consumers will pay for goods and services over the next year. 2.0 2.5 5. Prices U.S. consumers will pay for goods and services over the next 10 years (2019–2028). 2.2 2.5 The numbers represent medians of the individual forecasts (percent changes). For question 5, the firms reported a 10-year annual-average change. Summary of Returns August 2019 August vs. July Six Months from Now vs. August Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 21.8 37.2 41.1 20.5 16.8 38.0 46.3 33.3 13.7 32.6 Conditions New Orders 18.9 41.4 41.6 15.6 25.8 45.7 51.9 34.9 7.8 44.1 Shipments 24.9 37.8 43.4 18.8 19.0 41.3 52.7 34.1 9.2 43.5 Unfilled Orders 3.7 19.2 68.8 10.1 9.1 7.7 19.8 63.9 11.8 8.0 Delivery Times 15.0 15.2 76.0 5.9 9.3 6.2 12.3 68.7 10.8 1.5 Inventories 8.1 27.2 50.2 18.5 8.7 2.3 26.3 50.1 15.2 11.0 Prices Paid 16.1 24.8 61.1 12.0 12.8 35.3 46.7 38.8 7.7 39.0 Prices Received 9.5 16.2 79.3 3.2 13.0 34.1 33.6 54.0 5.9 27.8 Number of Emp. 30.0 24.5 54.6 20.9 3.6 24.9 31.3 57.6 6.3 25.0 Avg. Emp. Wrkwk. 23.0 23.0 56.3 16.2 6.8 7.9 16.6 70.3 8.9 7.7 Capital Ex. -- -- -- -- -- 36.9 30.2 57.0 7.6 22.6 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through August 12, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: August 15, 2019, at 8:30 a.m. ET. July 2019 Manufacturing conditions in the region showed improvement this month, according to firms responding to the July Manufacturing Business Outlook Survey. The survey’s indexes for general activity, new orders, shipments, and employment remained positive and increased from their June readings. Most of the survey’s future activity indexes increased, suggesting improved optimism about growth for the next six months. Current Indicators Suggest Growth The diffusion index for current general activity more than recovered from its decline last month, increasing from 0.3 in June to 21.8 this month. The indexes for current shipments and new orders also improved this month: The current new orders index increased 11 points, while the shipments index increased 8 points. The firms reported increases in manufacturing employment and longer workweeks this month. Over 36 percent of the firms reported higher employment, compared with 25 percent last month. Only 6 percent reported decreases in employment this month. The current employment index increased 15 points to 30.0, its highest reading since October 2017. The average workweek index also increased 16 points, hitting its highest reading in 14 months. Most Firms Report Modest Increase in Recent Demand In this month’s special questions, the firms were asked to characterize the underlying demand for their manufactured products over recent months. While 32 percent of the firms indicated recent decreases in underlying demand, 56 percent indicated that demand had increased. The largest share, 51 percent, characterized the increase in demand as modest. Price Indexes Suggest Modest Price Pressures The prices paid and prices received indexes both increased this month but remained well below their readings over the past few years. The current prices received index, reflecting the manufacturers’ own prices, increased 9 points to a reading of 9.5. Price increases for manufacturers’ own goods were reported by 16 percent of the firms this month, up from 10 percent last month. Price increases for purchased inputs were reported by 29 percent of the manufacturers this month, but 13 percent reported price decreases. The prices paid diffusion index increased 3 points to 16.1. Most Future Indicators Increased The diffusion index for future general activity increased 17 points to its highest reading since May 2018. Nearly 53 percent of the firms expect increases in activity over the next six months, while 15 percent expect declines. The future new orders index increased 14 points, while the future shipments index was unchanged from an elevated reading. The firms remained optimistic overall about hiring over the next six months: Although the future employment index decreased 2 points, 34 percent of the firms expect higher employment over the next six months. The future capital spending index improved 9 points this month to a reading of 36.9, its highest reading in 17 months. Summary Responses to the July Manufacturing Business Outlook Survey suggest an improvement in regional manufacturing conditions compared with last month. The new orders index, which reflects demand for manufactured goods, showed improvement this month, and more firms added to their payrolls. The survey’s future indexes indicate that respondents continue to expect growth over the next six months. Special Question (July 2019) Over the past several months, how would you characterize the underlying demand for your manufactured products? Exclude any purely seasonal effects. (%) Significantly increasing 5.3 Modestly increasing 50.8 subtotal (% increasing) 56.1 No change 12.3 Modestly decreasing 26.3 Significantly decreasing 5.3 subtotal (% decreasing) 31.6 Summary of Returns July 2019 July vs. June Six Months from Now vs. July Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 0.3 34.8 50.7 13.0 21.8 21.4 52.8 27.0 14.8 38.0 Conditions New Orders 8.3 35.7 43.8 16.8 18.9 31.5 59.4 25.8 13.7 45.7 Shipments 16.6 43.6 37.4 18.7 24.9 41.3 60.8 19.7 19.5 41.3 Unfilled Orders 10.2 22.6 55.2 18.9 3.7 -2.3 25.6 52.8 17.9 7.7 Delivery Times 15.6 20.1 72.1 5.2 15.0 2.4 15.7 74.7 9.6 6.2 Inventories 2.4 24.6 58.2 16.5 8.1 -0.9 23.6 55.1 21.3 2.3 Prices Paid 12.9 28.6 57.5 12.5 16.1 30.2 41.6 50.2 6.3 35.3 Prices Received 0.6 15.8 77.1 6.3 9.5 24.4 40.8 48.9 6.6 34.1 Number of Emp. 15.4 36.1 54.2 6.1 30.0 27.0 34.0 56.0 9.1 24.9 Avg. Emp. Wrkwk. 7.3 23.5 75.9 0.6 23.0 11.4 24.3 58.1 16.4 7.9 Capital Ex. -- -- -- -- -- 28.0 43.1 47.9 6.2 36.9 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through July 15, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: July 18, 2019, at 8:30 a.m. ET. June 2019 Manufacturing conditions in the region weakened this month, according to firms responding to the June Manufacturing Business Outlook Survey. The current activity index declined to a reading just above zero this month. The survey’s indexes for new orders, shipments, and employment remained positive but also declined from their May readings. Most of the survey’s future activity indexes improved but continue to reflect muted optimism for the remainder of the year. Current Indicators Suggest Moderating Growth The diffusion index for current general activity decreased from 16.6 in May to 0.3 this month. This is the lowest reading since February, when the index fell below zero for one month. The indexes for current shipments and new orders also declined this month: The current new orders index decreased 3 points, while the shipments index fell 11 points. On balance, the firms continued to report increases in employment. Nearly 25 percent of the responding firms reported increases in employment, while 9 percent reported decreases this month. The employment diffusion index, however, decreased 3 points to 15.4. The average workweek index fell 4 points this month, to 7.3. More Firms Reported Lower Prices The current prices received index, reflecting the manufacturers’ own prices, declined nearly 17 points to a reading of 0.6, its lowest reading since October 2016. Price increases for manufacturers’ own goods were reported by 10 percent of the firms this month, down from 23 percent last month. Price increases for purchased inputs were reported by 28 percent of the manufacturers this month, and the prices paid diffusion index decreased 10 points to 12.9, also its lowest reading since October 2016. Most Future Indicators Remain at Relatively Low Readings The diffusion index for future general activity increased 2 points from its May reading but remains well below readings of the last few years. Nearly 40 percent of the firms expect increases in activity over the next six months, while 19 percent expect declines. The future shipments and new orders indexes also improved: The future shipments index increased 13 points, while the future new orders index increased 10 points. The firms remained optimistic overall about hiring over the next six months: The future employment index was virtually unchanged at 27.0, with over 35 percent of the firms expecting higher employment over the next six months. The future capital spending index improved 5 points to a reading of 28.0, near its average for this year. Firms Expect Continued Production Expansion Next Quarter In this month’s special questions (see Special Questions), firms were asked to estimate their total production growth for the second quarter ending this month along with expected growth for the third quarter. The share of firms reporting expected increases in second-quarter production (59 percent) was greater than the share reporting decreases (26 percent). Looking ahead to the third quarter, 49 percent of the firms expect an acceleration in the growth rate of production, while 26 percent of the firms expect a deceleration. For those firms expecting an increase in production, 35 percent expect to hire additional workers. The remaining firms indicated that they would increase the productivity of current workers (30 percent) or increase the work hours of current workers (27 percent) rather than increasing the number of workers. Summary Responses to the June Manufacturing Business Outlook Survey suggest weaker regional manufacturing conditions compared with last month. The indexes for current activity, new orders, shipments, and employment remained positive but decreased from their May readings. The survey’s price indexes suggest a notable moderation in price pressures. The survey’s future indexes indicate that respondents continue to expect growth over the remainder of the year. Special Questions (June 2019) 1. How will your firm’s total production for the second quarter of 2019 compare with that of the first quarter? % of firms An increase of: 10% or more 6.9 8–10% 5.2 6–8% 8.6 4–6% 5.2 2–4% 19.0 1–2% 12.1 Less than 1% 1.7 Subtotal 58.7 No change 15.6 A decline of: Less than 1% 5.2 1–2% 3.4 2–4% 6.9 4–6% 3.4 6–8% 3.4 8–10% 0.0 10% or more 3.4 Subtotal 25.7 2. For the upcoming third quarter, what do you expect for the pace of growth in production at your plant compared with the current second quarter? % of firms Expecting acceleration: Significant acceleration 10.5 Some acceleration 22.8 Slight acceleration 15.8 Subtotal 49.1 No change 24.6 Expecting deceleration: Slight deceleration 15.8 Some deceleration 8.8 Significant deceleration 1.8 Subtotal 26.3 3. If you expect to increase production in the next quarter, by what means will this be accomplished? % of firms Hiring additional workers 35.1 Increasing work hours of current staff without hiring additional workers 27.0 Increasing productivity of current staff without hiring additional workers 29.7 Other 8.1 Summary of Returns June 2019 June vs. May Six Months from Now vs. June Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 16.6 31.2 36.9 30.9 0.3 19.7 39.9 32.4 18.5 21.4 Conditions New Orders 11.0 38.2 32.0 29.9 8.3 21.3 51.4 28.2 19.9 31.5 Shipments 27.6 37.8 40.3 21.2 16.6 28.3 56.7 25.2 15.4 41.3 Unfilled Orders 1.9 24.0 62.2 13.8 10.2 -10.6 14.8 63.2 17.1 -2.3 Delivery Times 3.4 20.7 71.7 5.2 15.6 4.5 15.6 67.8 13.2 2.4 Inventories -3.1 17.5 63.8 15.1 2.4 -2.4 18.9 57.1 19.8 -0.9 Prices Paid 23.1 28.0 55.2 15.1 12.9 42.3 38.3 51.2 8.1 30.2 Prices Received 17.5 9.8 80.0 9.2 0.6 38.6 28.8 62.7 4.4 24.4 Number of Emp. 18.2 24.8 63.8 9.4 15.4 27.3 35.1 53.7 8.1 27.0 Avg. Emp. Wrkwk. 10.9 18.7 68.2 11.4 7.3 9.2 29.3 50.9 17.9 11.4 Capital Ex. -- -- -- -- -- 23.3 32.8 57.5 4.8 28.0 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through June 17, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: June 20, 2019, at 8:30 a.m. ET. May 2019 Results from the May Manufacturing Business Outlook Survey suggest continued growth for the region’s manufacturing sector. The survey’s indexes for general activity, shipments, and employment increased from their April readings. The new orders index remained positive but decreased modestly. The survey’s future activity index, after falling in recent months, was little changed, while the firms’ forecast for future employment improved. Current Indicators Suggest Continued Growth The diffusion index for current general activity increased from 8.5 in April to 16.6 this month. Over 25 percent of the manufacturers reported increases in overall activity this month, while 9 percent reported decreases. The indexes for current shipments and new orders moved in opposite directions this month: The current shipments index increased 9 points, while the new orders index fell 5 points. The current inventories index fell 6 points to its first negative reading in four months. On balance, the firms continued to report increases in employment. The employment diffusion index increased 4 points to 18.2, its highest reading in five months. Nearly 27 percent of the responding firms reported increases in employment, while 8 percent reported decreases this month. The average workweek index remained essentially unchanged at 10.9. Price Indexes Suggest Continued Modest Price Pressures Price increases for purchased inputs were reported by 32 percent of the manufacturers this month, up from 26 percent last month. The prices paid diffusion index increased 2 points to 23.1 but remained well below readings over the past two and a half years. The current prices received index, reflecting the manufacturers’ own prices, declined 3 points to a reading of 17.5, its lowest reading in 17 months. Most Future Indicators Remain at Relatively Low Readings The diffusion index for future general activity increased 1 point from its April reading, which was its lowest since February 2016. Over 41 percent of the firms expect increases in activity over the next six months, while 22 percent expect declines. Movements in the future shipments and new orders indexes were mixed: The future shipments index increased 5 points, while the future new orders index fell 3 points. The indicators for future prices paid and prices received rose notably this month, increasing 16 points and 13 points, respectively. The firms were more optimistic about hiring over the next six months: The future employment index increased 12 points to 27.3, its highest reading in four months. The future capital spending index, however, fell 8 points to a reading of 23.3. Nearly 34 percent of the firms plan increases in capital spending over the next six months; 10 percent plan decreases. Firms’ Expectations for Own Prices Changed Little In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms’ median forecast was for an increase of 2.8 percent, about the same as when the question was last asked in February. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 2.5 percent, an increase from 2.3 percent in the previous quarter. The firms’ median forecast for the long-run (10-year average) inflation rate remained steady at 2.5 percent. Summary Responses to the May Manufacturing Business Outlook Survey suggest continued growth for the region’s manufacturing sector. The indexes for general activity, new orders, shipments, and employment all indicated continued expansion this month. The firms continued to be cautiously optimistic about growth over the next six months. Although some future indicators registered improvement, most indexes remain at relatively low readings. Special Questions (May 2019) Over the next year (2019:Q2 to 2020:Q2), please list your expected annual percent change with respect to the following: Current Previous Forecast Forecast (February 2019) For your firm: 1. Prices your firm will receive (for its own goods and services sold). 2.8 2.9 2. Compensation your firm will pay per employee (for wages and benefits). 3.0 3.0 For U.S. consumers: 3. Prices U.S. consumers will pay (for goods and services). 2.5 2.3 For the next 10 years (2019 through 2028), what is your expected annual average percent change with respect to the following: 4. Prices U.S. consumers will pay (for goods and services). 2.5 2.5 The numbers represent medians of the individual forecasts (as percent changes). The forecasts are over the next year for questions 1 to 3 and an annual average for the next 10 years for question 4. Summary of Returns May 2019 May vs. April Six Months from Now vs. May Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 8.5 25.4 62.4 8.8 16.6 19.1 41.4 27.6 21.7 19.7 Conditions New Orders 15.7 28.8 50.6 17.7 11.0 23.9 44.0 27.4 22.7 21.3 Shipments 18.4 42.0 42.7 14.4 27.6 23.1 44.4 34.3 16.1 28.3 Unfilled Orders 0.4 13.7 72.3 11.8 1.9 3.9 19.1 45.3 29.8 -10.6 Delivery Times -5.1 11.8 77.6 8.3 3.4 2.0 16.1 65.3 11.5 4.5 Inventories 2.6 20.2 52.8 23.3 -3.1 -7.6 24.9 41.1 27.4 -2.4 Prices Paid 21.6 31.8 57.2 8.6 23.1 26.0 48.7 39.3 6.4 42.3 Prices Received 20.0 23.4 70.7 5.9 17.5 25.4 43.1 45.8 4.5 38.6 Number of Emp. 14.7 26.6 63.0 8.4 18.2 14.9 35.6 49.5 8.2 27.3 Avg. Emp. Wrkwk. 11.2 20.2 70.3 9.3 10.9 3.6 22.1 58.5 13.0 9.2 Capital Ex. -- -- -- -- -- 30.9 33.5 52.0 10.2 23.3 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through May 13, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: May 16, 2019, at 8:30 a.m. ET. April 2019 Regional manufacturing activity continued to grow in April, according to results from this month's Manufacturing Business Outlook Survey. Although the survey's indicators for general activity and shipments fell from their readings last month, the indicators for new orders, employment, and the workweek improved. The survey's indexes for future activity and employment continued to moderate, but the surveyed firms remained generally optimistic about growth over the next six months. Current Indicators Positive but Mixed The index for current manufacturing activity in the region decreased from a reading of 13.7 in March to 8.5 this month. The survey's other broad indicators were positive, but their movements were mixed. The new orders index increased 14 points to 15.7 this month. Over 39 percent of the firms reported an increase in new orders, up from 26 percent last month. The current shipments index decreased 2 points from its reading in March, with 21 percent of the firms reporting decreases compared with 14 percent last month. Delivery times shortened this month, according to the respondents: The delivery times index fell 14 points to its first negative reading in 30 months. The current inventory index also fell, by 15 points to a reading of 2.6. The firms continued to add to their payrolls this month. The current employment index increased from a reading of 9.6 in March to 14.7 this month. Nearly 27 percent of the responding firms reported increases in employment, while 12 percent of the firms reported decreases. The current workweek index remained positive and edged up 1 point to 11.2. Prices Received Diffusion Index Continues to Recede With respect to prices received for firms' own manufactured goods, the prices received index decreased 5 points to 20.0, its lowest reading since December 2017. Nearly 23 percent of the firms reported higher prices, down from 26 percent last month. The prices paid index increased 2 points to 21.6, its first increase in 9 months. Over 26 percent of the firms reported higher input prices this month, while 5 percent reported lower input prices. Most Firms Are Less Optimistic About Future Activity and Employment The diffusion index for future general activity declined nearly 3 points to 19.1, its lowest reading since February 2016. Over 39 percent of the firms expect increases in activity over the next six months, while 20 percent expect declines. The future new orders and shipments indexes, however, increased slightly, by 4 points and 3 points, respectively. The indicators for future prices paid and prices received fell notably this month, by 21 points and 7 points, respectively. The largest percentage of firms continues to expect steady prices over the next six months. The firms were less optimistic about future hiring over the next six months: The future employment index fell 10 points to 14.9, its lowest reading since November 2016. The future capital spending index, however, rebounded 11 points to a reading of 30.9. Summary The firms' responses indicated continued growth in the region's manufacturing sector this month. The survey's broadest measures of economic growth remain positive, but the directions of movement were mixed. The indexes for new orders and employment improved, while the indexes for activity and shipments decreased somewhat. Price pressures remain generally muted, with the prices received index at its lowest reading in 16 months. The survey's future indexes indicate that respondents continue to expect growth over the next six months, but the readings for future activity and employment continued to trend lower. Summary of Returns April 2019 April vs. March Six Months from Now vs. April Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 13.7 31.9 43.3 23.4 8.5 21.8 39.1 30.7 20.0 19.1 Conditions New Orders 1.9 39.4 36.8 23.8 15.7 19.8 43.5 31.7 19.6 23.9 Shipments 20.0 39.2 39.7 20.8 18.4 20.5 42.3 32.1 19.2 23.1 Unfilled Orders 3.1 18.5 62.4 18.1 0.4 13.1 19.6 62.9 15.7 3.9 Delivery Times 8.8 8.5 77.3 13.6 -5.1 -7.5 12.3 73.3 10.4 2.0 Inventories 17.2 25.6 47.6 23.0 2.6 -9.8 12.4 58.4 20.0 -7.6 Prices Paid 19.7 26.4 67.1 4.8 21.6 47.3 30.3 57.2 4.4 26.0 Prices Received 24.7 22.9 71.4 2.9 20.0 32.4 28.7 62.9 3.2 25.4 Number of Emp. 9.6 26.8 61.0 12.1 14.7 24.9 25.1 60.3 10.2 14.9 Avg. Emp. Wrkwk. 10.6 22.6 65.0 11.4 11.2 9.2 12.4 73.7 8.8 3.6 Capital Ex. -- -- -- -- -- 19.5 34.1 54.6 3.2 30.9 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through April 15, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: April 18, 2019, at 8:30 a.m. ET. March 2019 Manufacturing conditions in the region improved this month, according to firms responding to the March Manufacturing Business Outlook Survey. The indicators for general activity, new orders, and shipments returned to positive territory, while the indicator for employment remained positive. Price pressures also moderated, according to the surveyed firms. Most of the survey’s indexes for future conditions continued to moderate, but the firms remained generally optimistic about growth over the next six months. Most Current Indicators Rebound The index for current manufacturing activity in the region increased from a reading of -4.1 in February to 13.7 this month. The index nearly recovered its decline from last month, when it dropped to its first negative reading in almost three years. Both the new orders and shipments indexes also increased this month. The current new orders index improved modestly, increasing from -2.4 in February to 1.9 in March. The current shipments index increased 25 points to 20.0. The firms continued to add to their payrolls this month. The current employment index, however, decreased from a reading of 14.5 in February to 9.6 this month. Nearly 20 percent of the responding firms reported increases in employment, while 10 percent of the firms reported decreases in employment. The current workweek index remained positive and increased 6 points to 10.6. Price Pressures Continue to Moderate Price pressures arising from purchased inputs continued to ease. The prices paid index decreased 2 points to 19.7. The prices paid index declined for the eighth consecutive month and is at its lowest reading since July 2017. Nearly 24 percent of the firms reported higher input prices this month, down from 28 percent last month. With respect to prices received for firms’ own manufactured goods, 26 percent of the firms reported higher prices, down from 33 percent last month. The prices received index decreased 3 points to 24.7. Firms Less Optimistic but Still Expect to Expand Employment The diffusion index for future general activity declined nearly 10 points to 21.8 this month, its lowest reading since February 2016. Nearly 42 percent of the firms expect increases in activity over the next six months, while 20 percent expect declines. The future new orders index also decreased 10 points, and the future shipments index decreased 19 points. The future employment index edged up 1 point to 24.9. The percentage of firms expecting to increase employment over the next six months (38 percent) remained higher than the percentage expecting to decrease employment (13 percent). The future capital spending index fell 12 points to 19.5, its lowest reading since November 2016. Firms Report Increasing Difficulties Finding Skilled Workers in Tight Labor Market In special questions this month, the firms were asked generally about worker shortages, any perceived mismatches between skill requirements and labor supply, and how they were dealing with these problems. Nearly 74 percent of the firms indicated labor shortages, while 66 percent indicated skills mismatches between requirements and available labor. Nearly 51 percent of the surveyed firms also reported that they had positions that have remained vacant for more than 90 days. Over 47 percent of the firms indicated a tightening of the labor market, such that it is getting harder to fill positions, up from 35 percent when the question was asked last year. In addition to increasing wages and stepping up recruiting efforts, the firms have adopted a mix of strategies to deal with these problems, including increasing training of existing employees and new hires as well as recruiting outside the region. A sizable share of firms (30 percent) indicated that they have hired less qualified workers to meet their labor requirements. Summary The firms’ responses indicated some growth in the region’s manufacturing sector this month. The survey’s broadest measures for activity, new orders, and shipments were positive and recovered from negative readings last month. On balance, the firms continued to report growth in employment. The survey’s future indexes indicate that respondents continue to expect growth over the next six months, but most readings have been trending lower. Special Questions (March 2019) 1. Has your firm experienced any significant labor shortages or mismatches between labor skill requirements and labor supply?* 2019 2018 (%) (%) (%) Labor shortages 73.6 63.8 Skills mismatches 66.0 69.6 Job vacancies remaining more than three months 50.9 47.8 2. Is your firm experiencing a labor shortage in general or in certain skills, abilities, or positions? We are hiring and receive a sufficient number of qualified applicants to fill open positions. 1.9 1.5 We are seeing a significant shortage in qualified applicants for some skills and positions. 20.8 41.2 We are seeing a tightening labor market, such that it is getting harder to fill positions in general, but still possible to fill them. 47.2 35.3 We are seeing a broad labor shortage, such that it is hard to fill any position. 17.0 7.4 We are not hiring. 13.2 7.4 Not applicable 0.0 2.9 No response 0.0 4.4 3. What actions has your firm taken to address skills shortages?* Increased recruitment efforts 66.0 75.4 Increased wages 54.7 50.7 Provided additional training to existing staff 52.8 52.2 Increased training for hired workers** 43.4 - Partnered with educational institution to align curriculum with talent needs 41.5 34.8 Expanded recruitment outside the region 32.1 24.6 Hired less qualified workers to meet labor requirements** 30.2 - Increased recruitment incentives 22.6 15.9 Increased benefits 17.0 14.5 Used phased retirement program to retain older workers 13.2 10.1 Decreased production 9.4 4.3 Other 3.8 0.0 *Percentage will not sum to 100 percent because more than one answer could be selected. **These categories were added in 2019. Summary of Returns March 2019 March vs. February Six Months from Now vs. March Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business -4.1 32.2 48.3 18.5 13.7 31.3 41.7 35.8 19.9 21.8 Conditions New Orders -2.4 26.1 46.4 24.2 1.9 29.4 40.8 35.6 21.1 19.8 Shipments -5.3 33.8 48.6 13.8 20.0 39.8 37.9 44.3 17.5 20.5 Unfilled Orders 6.9 16.8 68.7 13.7 3.1 11.7 24.6 63.2 11.5 13.1 Delivery Times 13.6 16.5 75.7 7.7 8.8 -3.6 7.1 77.5 14.6 -7.5 Inventories 3.3 32.0 50.3 14.8 17.2 4.2 13.8 62.6 23.6 -9.8 Prices Paid 21.8 23.9 71.3 4.1 19.7 39.8 54.5 38.2 7.3 47.3 Prices Received 27.7 26.2 71.1 1.6 24.7 29.7 37.4 57.6 5.0 32.4 Number of Emp. 14.5 19.9 68.9 10.3 9.6 23.6 38.1 48.7 13.2 24.9 Avg. Emp. Wrkwk. 4.7 19.6 68.1 9.0 10.6 6.9 22.5 62.0 13.4 9.2 Capital Ex. -- -- -- -- -- 31.7 32.0 52.9 12.5 19.5 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through March 18, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: March 21, 2019, at 8:30 a.m. ET. February 2019 Manufacturing conditions in the region weakened this month, according to firms responding to the February Manufacturing Business Outlook Survey. The indicators for general activity, new orders, and shipments fell into negative territory, but the indicator for employment remained positive. Input prices also moderated notably this month. The survey’s indexes for future conditions were mostly steady, with firms remaining generally optimistic about growth over the next six months. Some Indicators Suggest Weaker Conditions The index for current manufacturing activity in the region decreased from a reading of 17.0 in January to -4.1 this month. This is the index’s first negative reading since May 2016. Both the new orders and shipments indexes also fell this month. The current new orders index decreased nearly 24 points to -2.4, and the current shipments index decreased 17 points to -5.3. The firms continued to add to their payrolls this month. The current employment index improved from a reading of 9.6 in January to 14.5 this month. Nearly 24 percent of the responding firms reported increases in employment, while 9 percent of the firms reported decreases in employment. The current workweek index also remained positive but decreased 1 point to a reading of 4.7. Inputs Price Pressures Continue to Moderate Price pressures originating from purchased inputs continued to abate. The prices paid index decreased 11 points to 21.8. The index has been trending down since last July and is now at its lowest reading since July 2017. Over 28 percent of the firms reported higher input prices this month, down from 40 percent last month. With respect to prices received for firms’ own manufactured goods, almost 33 percent of the firms reported higher prices, and 5 percent reported lower prices. The prices received index increased 3 points to 27.7. Expectations Hold Steady, but Employment Forecast Moderated The diffusion index for future general activity held virtually steady this month, at 31.3. Over 46 percent of the firms expect increases in activity over the next six months, while 15 percent expect declines. The future new orders index decreased 3 points, but the future shipments index increased 4 points. The future employment index fell 11 points to 23.6, its lowest reading since November 2016. However, the percentage of firms expecting to increase employment over the next six months (31 percent) remained higher than the percentage expecting to decrease employment (7 percent). Firms Expect Own Prices to Rise Faster Than Inflation In this month’s special questions, the firms were asked to forecast the changes in the prices of their own products and for U.S. consumers over the next four quarters. Regarding their own prices, the firms’ median forecast was for an increase of 2.9 percent, about the same as when the question was last asked in November. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 2.3 percent, a decrease from 3.0 percent in the previous quarter. The firms’ median forecast for the long-run (10-year average) inflation rate also decreased, from 3.0 percent to 2.5 percent. Summary The firms’ responses indicated weaker conditions in the region’s manufacturing sector this month. The survey’s broadest measures (for activity, new orders, and shipments) were negative, yet firms reported continued increases in employment this month. The survey’s future indexes indicate that respondents continue to expect growth over the next six months. Special Questions (February 2019) Over the next year (2019:Q1 to 2020:Q1), please list your expected annual percent change with respect to the following: Current Previous Forecast Forecast (November 2018) 1. For your firm: Prices your firm will receive (for its own goods and services sold). 2.9 3.0 Compensation your firm will pay per employee (for wages and benefits). 3.0 3.0 2. For your employees: Prices your employees will pay (for goods and services where they live). 2.3 2.5 3. For U.S. consumers: Prices U.S. consumers will pay (for goods and services). 2.3 3.0 For the next 10 years (2019 through 2028), what is your expected annual average percent change with respect to the following: 4. For U.S. consumers: Prices U.S. consumers will pay (for goods and services). 2.5 3.0 The numbers represent medians of the individual forecasts (as percent changes). The forecasts are over the next year for questions 1 to 3 and an annual average for the next 10 years for question 4. Summary of Returns February 2019 February vs. January Six Months from Now vs. February Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 17.0 14.6 64.1 18.7 -4.1 31.2 46.2 28.8 14.9 31.3 Conditions New Orders 21.3 21.7 54.2 24.1 -2.4 32.2 44.9 33.1 15.4 29.4 Shipments 11.4 21.9 50.9 27.2 -5.3 36.2 51.9 28.3 12.1 39.8 Unfilled Orders 5.4 23.1 60.8 16.1 6.9 -0.4 21.5 63.6 9.9 11.7 Delivery Times 13.4 18.2 77.1 4.7 13.6 -0.1 10.9 69.7 14.6 -3.6 Inventories -7.6 24.6 52.6 21.3 3.3 7.8 21.4 53.2 17.2 4.2 Prices Paid 32.7 28.2 64.7 6.4 21.8 39.9 41.4 50.7 1.6 39.8 Prices Received 24.8 32.5 62.4 4.7 27.7 34.1 29.9 61.4 0.2 29.7 Number of Emp. 9.6 23.6 64.1 9.1 14.5 34.7 30.8 54.9 7.2 23.6 Avg. Emp. Wrkwk. 6.0 14.0 76.8 9.3 4.7 17.0 13.6 74.6 6.7 6.9 Capital Ex. -- -- -- -- -- 31.6 37.0 49.2 5.2 31.7 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through February 19, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: February 21, 2019, at 8:30 a.m. ET. January 2019 Manufacturing activity in the region continued to grow, according to results from the January Manufacturing Business Outlook Survey. The survey's broad indicators remained positive, although their movements were mixed again this month: The general activity and new orders indicators increased from their readings last month, while the indicators for shipments and employment decreased. The firms reported growth in the underlying demand for their products and are generally optimistic about future growth and employment. Current Indicators Suggest Growth The index for current manufacturing activity in the region increased from a revised reading of 9.1 in December to 17.0 this month.* Over 30 percent of the manufacturers reported increases in overall activity, while 13 percent reported decreases. The new orders index increased 8 points to 21.3, its highest reading in six months. The current shipments index, however, decreased 1 point to 11.4. Both the unfilled orders and delivery times indexes were positive this month, suggesting higher unfilled orders and slower delivery times. Inventories declined this month: The current inventory index fell 10 points to -7.6, its first negative reading in 14 months. The firms continued to report overall higher employment, but the current employment index fell nearly 10 points to 9.6, its lowest reading in 16 months. Over 22 percent of the responding firms reported increases in employment this month, while 13 percent of the firms reported decreases in employment. The current workweek index increased 2 points to a reading of 6.0. Price Index for Inputs Continues Downward Trend The survey's diffusion indexes for prices remained positive but decreased from their readings in December. On the cost side, the prices paid index decreased 6 points to 32.7. The index has been trending down since last July and is at its lowest reading in 13 months. With respect to prices received for firms' own manufactured goods, 29 percent of the firms reported higher prices, and 4 percent reported lower prices. The prices received index decreased 4 points to 24.8. Most Six-Month Indicators Remain Positive The diffusion index for future general activity increased slightly, from a revised reading of 29.9 to a reading of 31.2 this month. Over 46 percent of the firms expect increases in activity over the next six months, while 15 percent expect declines. The future new orders index decreased 6 points, but the future shipments index increased 1 point. The future employment index edged up 1 point, with nearly 41 percent of the firms indicating that they expect to add workers over the next six months. Firms Expect to Increase Production in Near Term In Special Questions this month, the firms were asked to characterize current demand and production of their manufactured products over the past few months and to forecast their production increases for the first quarter of the year. Most firms (46 percent) reported an increase in underlying demand: Only 11 percent characterized underlying demand as increasing significantly, while 35 percent characterized it as increasing modestly. Over 65 percent of the firms anticipate increasing production in the first quarter, although 29 percent expect decreases. Among those increasing production, one-third indicated this will require hiring additional labor. Summary The firms' responses indicated continued growth in the region's manufacturing sector this month. The survey's broad current indicators remained positive, and the indexes for activity and new orders improved. The firms reported moderated increases in employment this month but indicated plans for further increases over the next six months, in line with expanded production of manufactured products. The survey's future indexes indicate that respondents continue to expect growth over the next six months. * The survey’s annual historical revisions, which incorporate new seasonal adjustment factors, were released on January 10, 2019. The full set of revised historical data is available at www.philadelphiafed.org/mbos-histrev2019. Special Questions (January 2019) 1. Over the past several months, how would you characterize the underlying demand for your manufactured products? Exclude any purely seasonal effects. % of firms Significantly increasing 11.1 Modestly increasing 35.2 Subtotal 46.3 No change 25.9 Modest deceleration 22.2 Significant deceleration 5.6 Subtotal 27.8 2. How will your firm’s total production for the first quarter of 2019 compare with that of the last quarter of 2018? % of firms An increase of: 10% or more 5.8 8–10% 0.0 6–8% 3.8 4–6% 11.5 2–4% 23.1 1–2% 17.3 less than 1% 3.8 Subtotal 65.4 No change 5.8 A decline of: less than 1% 1.9 1–2% 0.0 2–4% 9.6 4–6% 7.7 6–8% 1.9 8–10% 1.9 10% or more 5.8 Subtotal 28.8 3. If you expect to increase production in the next quarter, by what means will this be accomplished? % of firms Hiring additional workers 33.3 Increasing work hours of current staff without hiring additional workers 36.4 Increasing productivity of current staff without hiring additional workers 24.2 Other 6.1 Summary of Returns January 2019 January vs. December Six Months from Now vs. January Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Business 9.1 30.4 53.1 13.4 17.0 29.9 46.4 28.5 15.2 31.2 Conditions New Orders 13.3 38.3 44.8 16.9 21.3 38.5 46.8 33.0 14.6 32.2 Shipments 12.4 30.9 49.0 19.5 11.4 35.0 47.3 36.4 11.0 36.2 Unfilled Orders 9.1 20.9 60.9 15.5 5.4 10.6 17.4 61.2 17.8 -0.4 Delivery Times 5.5 23.0 65.9 9.6 13.4 2.0 12.8 70.8 12.9 -0.1 Inventories 2.6 13.4 65.7 20.9 -7.6 2.3 24.4 54.4 16.6 7.8 Prices Paid 38.9 39.8 53.1 7.1 32.7 60.9 45.1 46.4 5.2 39.9 Prices Received 29.0 28.8 66.6 4.0 24.8 47.9 38.2 50.6 4.1 34.1 Number of Emp. 19.1 22.1 63.4 12.5 9.6 33.5 40.9 48.9 6.2 34.7 Avg. Emp. Wrkwk. 4.0 19.8 61.5 13.9 6.0 10.2 24.4 58.8 7.4 17.0 Capital Ex. -- -- -- -- -- 34.5 38.8 48.3 7.2 31.6 Notes: (1) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (2) All data are seasonally adjusted. (3) Percentages may not sum to 100 percent because of rounding, omission by respondents, or both. (4) Survey results reflect data received through January 14, 2019. Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey Released: January 17, 2019, at 8:30 a.m. ET.