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Philadelphia Nonmanufacturing Activity remained positive in November
Firms responding to November's Nonmanufacturing Business Outlook Survey reported that the pace of regional nonmanufacturing activity remains positive, with firms modestly increasing their assessment of current conditions for the region. Respondents reported a decrease in activity for their firms, however, and most of the individual indicators showed a decrease as well. The survey's indicators for new orders, unfilled orders, and employment fell, while the indicators for sales and wages rose. The future activity indicators were relatively steady and show that the responding firms remain optimistic about nonmanufacturing activity increasing in the region and at their firms over the next six months.
Nonmanufacturing Activity Remains Positive
The diffusion index for current activity for the region rose 9 points, to 26.3, in November, as the proportion of firms reporting an increase in regional activity rose from 33 percent in October to 39 percent in November. The diffusion index for current activity at the firm level also stands at 26.3, falling 11 points from its October reading. At 47 percent, there was a small decline (3 points) in the proportion of respondents reporting an increase in activity at their firms this month, and the proportion reporting a decrease in activity rose 9 points, to 21 percent. Both indexes are near their historical averages of 24.4 for general activity in the region and 30.6 for general activity at the firm level.
Orders and Sales Are Mixed
In November, the new orders index fell 14 points, to 15.8, and the unfilled orders index fell almost 12 points, to 3.5. These changes were largely driven by a decline in the share of firms reporting an increase in both types of orders. The sales/revenues index rose 5 points, to 22.8, however. For this indicator, the share of firms reporting increases in sales or revenues rose from 38 percent in October to 44 percent in November.
Employment Conditions Weaken
Responses to the survey indicate weakening conditions for labor market demand in November. The full-time employment index fell almost 10 points, to 10.5; the part-time employment index fell 6 points, to 8.8; and the workweek index fell 11 points, to 8.8. The index for wages and benefits rose, however, as the share of firms reporting an increase in wages and benefits climbed from 28 percent in October to 35 percent.
Firms Report Steady Prices
The prices paid index rose 2 points, to 19.3. The prices received index fell 1 point, to 21.1. The share of firms reporting no change in prices paid stands at 61 percent, while the share of firms reporting no change in prices received stands at 53 percent.
Optimism About the Future Is High
Respondents to the survey remain optimistic about future activity over the next six months. At the individual firm level, the future activity diffusion index was 50.9 in November, down slightly from 52.5 in October. Only 9 percent of the respondents foresee lower activity at their firms over the next six months. At the regional level, the future activity diffusion index was 43.9 in November, a slight increase from 42.5 in October. These future indexes are near their historical averages of 50.6 for future activity at the firm level and 45.5 for future activity in the region.
Corrections Made to Historical Future Indexes
We recently discovered a programming error that affected how responses to the two questions on future activity were recorded from April 2011 through October 2015. The October values and the historical averages for the future index reported here reflect a significant downward correction from the originally reported future indexes. The correction lowered the October 2015 firm future index and region future index, for example, by over 30 and 40 points, respectively (both were originally reported as 85.0). A full explanation of the error and historical data with the corrections are available on our website. The error did not affect other indexes from this survey.
Special Questions About the Future Rate of Inflation
In this month’s special questions, firms were asked to quantify their forecasts for changes in prices of their own products, changes in compensation to their employees, and changes in prices faced by their employees and U.S. consumers over the next four quarters. The median forecast was an increase of 3 percent for their own prices, compensation, and consumer prices in general. In regard to the average rate of inflation for consumers over the next 10 years, the median of the responses from the firms was also 3 percent.
Results from the November Nonmanufacturing Business Outlook Survey suggest continued expansion in the region among nonmanufacturing firms. In addition, based on the future activity indexes at both the company and regional levels, firms are optimistic about growth over the next six months.
Posted: November 24, 2015 Tuesday 10:00 AM