The pace of activity in the Philadelphia region's manufacturing sector was generally steady in October, according to firms surveyed for this month's Philadelphia Federal Reserve Business Outlook Survey. Although the index for general activity was slightly negative this month, indicators for new orders, shipments, and employment suggest some growth.
Firms continued to report a rise in prices for inputs, although these cost
increases were less widespread than in previous surveys. The region's
manufacturing executives were more optimistic about future activity, with most indicators rebounding from their six-year lows in September.
Indicators Suggest Little Growth
The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, edged slightly lower, from minus-0.4 in September to minus-0.7 this month. Twenty-two percent of the firms reported increased activity this month, but 23 percent reported decreased activity. The new orders and shipments indexes rebounded from their slightly negative readings in the previous month: The new orders index increased 15 points, and the shipments index increased 12 points. However, both the delivery time and unfilled orders indexes fell; the readings have been negative for two consecutive months.
Only moderate growth in manufacturing is suggested in replies about employment this month. The current employment index fell a modest one point from its reading in September and remains at a relatively low level. Twenty-two percent of the firms reported increases in employment; 13 percent reported reductions. However, more firms reported decreases in the workweek (18 percent) than reported increases (16 percent), and the average workweek index fell seven
points.
Price Pressures Moderate
Respondents reported higher costs for inputs again this month, but increases were not as widespread as in previous surveys. The prices paid index remained at a relatively high reading of 32 but fell six points from September (the index has now fallen for three consecutive months). Forty-two percent of the firms reported higher input prices; 10 percent reported lower input prices.
Twenty-two percent of the firms reported higher prices for final manufactured goods, down slightly from 27 percent last month. The prices received index edged four points lower this month.
Expectations for future manufacturing growth improved notably this month, following a sharp decline last month. Indicators for future activity, new orders, shipments, and employment all rose from their September readings. The future general activity index increased from -0.2 to 16.7; paralleling this increase, the indexes for future new orders and shipments both rose about 20 points. The future employment index increased seven points.
Special Questions
In special questions this month, firms were asked about the most serious problems facing their business. The highest-ranked problems (categories checked as relatively major) were finding qualified workers and the cost of benefits. The categories that were higher than when the question was asked last year were finding qualified workers, benefit costs, and low demand for products.
Summary
Growth in the region's manufacturing sector is steady or up slightly this month. Although the indicator for general activity suggests no overall growth, indexes for new orders, shipments, and employment suggest a slight improvement from last month. According to responses from this month's survey, input price pressures are still strong but are less pervasive than in the previous month. The share of firms reporting higher prices for their manufactured goods was down slightly. Indicators for the next six months suggest that firms are more confident about
future conditions than they were in September.
|
Compared to Last Year: | |||||
|
|
Greater |
Same |
Less | ||
|
Finding Qualified Workers |
43.2 |
7.4 |
49.4 | ||
| Labor Costs-Benefits |
42.0 |
2.5 |
55.6 | ||
| Government Regulations |
25.6 |
4.9 |
69.5 | ||
| Cost of Resources |
35.0 |
6.3 |
58.8 | ||
| Taxes |
21.8 |
0.0 |
78.2 | ||
| Foreign Competition |
30.9 |
3.7 |
65.4 | ||
| Current Low Demand for Product |
40.2 |
30.5 |
29.3 | ||
| High Rate of Capacity Utilization |
13.9 |
21.5 |
64.6 | ||
| Labor Costs-Wages |
21.0 |
4.9 |
74.1 | ||
| Availability of Resources |
17.7 |
6.3 |
75.9 | ||
