Philly Fed Survey Results Suggest Continued Expansion in Regional Manufacturing
March 15 2012 - 10:00AM
Business Wire
Manufacturing firms responding to the Federal Reserve Bank of
Philadelphia’s monthly Business Outlook Survey suggest that
regional manufacturing activity continued to grow at a moderate
pace in March. The survey’s broad indicators for general activity,
new orders, shipments, and employment all remained positive. Firms
continued to report price pressures, but responses suggest that
pressures have eased from the previous month. The survey’s broad
indicators of future activity remained at levels consistent with
continued optimism.
Indicators Suggest Continued Expansion
The survey’s broadest measure of manufacturing conditions, the
diffusion index of current activity, edged slightly higher, from a
reading of 10.2 in February to 12.5, its highest reading since
April of last year (see Chart). Indexes for new orders and
shipments remained positive but weaker than their February levels.
The new orders index decreased 8 points, to 3.3, while the
shipments index declined 12 points, to 3.5. The indexes for both
delivery times and unfilled orders, which recorded slightly
positive readings last month, fell back into negative territory
this month, suggesting faster deliveries and a decline in unfilled
orders.
Firms’ responses suggest a slight pickup in levels of employment
this month. The current employment index, which has been positive
for seven consecutive months, increased 6 points. Twenty-two
percent of the firms reported an increase in employment, compared
to 15 percent in February. Firms reporting a longer workweek (20
percent) only narrowly outnumbered those reporting a shorter one
(17 percent), and the current workweek index decreased 7
points.
Upward Price Pressures Moderate
Indexes for prices paid and prices received both decreased this
month, although positive diffusion indexes for both suggest that
overall price pressures remain. Twenty-four percent of the firms
reported higher prices for inputs this month, down from 42 percent
last month. The prices paid index decreased 20 points, to 18.7, its
first monthly decline in five months. On balance, firms also
reported a rise in prices for their own manufactured goods: More
firms reported price increases (19 percent) than reported decreases
(11 percent). The prices received index, however, declined 7
points, the first decrease in five months.
Firms’ Outlook Still Optimistic
The future general activity index fell modestly, from a reading
of 33.3 in February to 32.9 this month. The index remains at a
relatively high level (see Chart). The indexes for future new
orders and shipments showed slight improvement, increasing 4 points
and 2 points, respectively. The future employment index showed
little overall change this month. Firms expecting to increase
employment over the next six months (33 percent) outnumber those
expecting to decrease it (11 percent).
In special questions this month, firms were asked about their
expectations for production growth for the upcoming second quarter
(see Special Questions). Fifty-nine percent of the firms expect
increases in production in the second quarter; 23 percent expect
decreases. This is in contrast to the situation in March of last
year, when 75 percent of the firms were expecting growth and 10
percent were expecting declines in production. The average growth
expected among the reporting firms for the second quarter was about
1.4 percent. Nearly 58 percent of the firms said second-quarter
production growth would represent an acceleration in growth (6
percent characterized it as “significant acceleration”; 51 percent
said the expected growth represented “some acceleration”).
Summary
According to respondents to the March Business Outlook Survey,
the region’s manufacturing sector showed modest improvement this
month. All of the broad indicators remained positive, but firms
reported only weak growth in new orders and shipments this month.
The reporting firms also added to their payrolls this month,
suggesting continued improvement in business conditions. Although
price pressures remain, they are less widespread than in recent
months. The firms’ outlook and employment plans for the next six
months remain generally optimistic.
Special Questions (March 2012) 1. What change, if
any, do you anticipate in your firm’s production during the second
quarter of 2012 compared to the first quarter? 2012
2011 Increase of more than 5% 24.2%
59.0%
75.3% Increase of 3-5% 10.3% Increase of less
than 3% 24.4% Total increase
No change 17.9% Decrease
of less than 3% 9.0% 23.1% 10.4% Decrease of 3-5%
0.0% Decrease of more than 5% 14.1%
Total decrease 2012: Average 1.4%,
Median: 1.5%
2011: Average 2.7%, Median: 3.5%
2. Would this represent an acceleration or deceleration of
growth from the first quarter of 2012? Significant acceleration
6.4%
Acceleration:57.7%
Some acceleration 51.3% No change 23.1%
Some deceleration 11.5% Deceleration:17.9%
Significant deceleration 6.4% 3. Does the
expected increase or decrease reflect seasonal factors or a change
in business conditions? Seasonal factors 20.5% Change in
business conditions 51.3% Other 11.5% Percentages may
not add to 100 percent because not all firms answered all
questions.
BUSINESS OUTLOOKSURVEY
March 2012
March vs. February
Six Months from Now vs. March
PreviousDiffusionIndex
Increase
NoChange
Decrease
DiffusionIndex
PreviousDiffusionIndex
Increase
NoChange
Decrease
DiffusionIndex
What is your evaluation of the level of general business activity?
10.2
40.3 28.1 27.7
12.5
33.3 45.4 42.1 12.5
32.9
Company Business Indicators
New Orders
11.7 37.0 27.8 33.7
3.3 32.5 44.0 44.8 7.6
36.4
Shipments
15.0 33.6 34.8 30.1
3.5
29.0 44.3 42.6 13.0
31.3
Unfilled Orders
2.2 12.7 62.3 23.8
-11.0 8.3 18.1 69.7 9.1
9.1
Delivery Times
1.5 9.3 72.9 16.3
-7.1 -2.7 12.6 70.3 12.6
0.1
Inventories
-12.9 21.4 58.2 20.5
0.9 3.9 22.6 55.5 16.8
5.8
Prices Paid
38.7 24.3 67.2 5.6
18.7 50.4 43.4 52.6 4.0
39.4
Prices Received
15.0 19.1 69.5 10.7
8.4 32.0 32.3 59.1 6.7
25.6
Number of Employees
1.1 22.2 62.4 15.4
6.8 22.5 32.7 51.1 10.9
21.8
Average Employee Workweek
10.1 19.7 58.9 17.0
2.7 10.8 22.7 62.6 11.4
11.2
Capital Expenditures
-- -- -- --
--
18.5 28.9 48.1 14.8 14.1
NOTES:
(1) Items may not add up to 100 percent
because of omission by respondents.
(2) All data are seasonally adjusted.
(3) Diffusion indexes represent the
percentage indicating an increase minus the percentage indicating a
decrease.
(4) Survey results reflect data received
through March 13, 2012.