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Philadelphia Fed NonManufacturing Survey Suggest Activity shows signs of improvement in July
Nonmanufacturing firms reported signs of improvement in regional nonmanufacturing activity this month, according to results from the Nonmanufacturing Business Outlook Survey. The indexes for general activity at the firm level and sales/revenues showed positive readings for the second consecutive month after a string of negative readings in the spring, coinciding with the phased reopening of the service economy in the region. Additionally, the new orders index showed a positive reading for the first time since February. However, the full-time employment index remained negative. The respondents expect overall improvement in conditions over the next six months, as both future activity indexes remain positive.
Current Indicators Reach Positive Territory
The diffusion index for current general activity at the firm level rose for the third consecutive month from 7.3 in June to 23.7 in July, after reaching historic lows in the spring (see Chart 1). Over 49 percent of the firms reported increases (up from 45 percent last month), while 25 percent reported decreases (down from 38 percent last month). The new orders index rose 26 points to 13.8 in July, its third consecutive month with a double-digit increase and its first positive reading since February. Forty percent of the firms reported increases in new orders, while 26 percent reported decreases. The sales/revenues index rose from 0.3 in June to 11.1 in July. The regional activity index increased 4 points to 0.7, its first positive reading since February.
Employment Indicators Remain Negative
The firms reported overall decreases in full-time and part-time employment for the fifth consecutive month. The full-time employment index rose 5 points to -8.1, rising for the third consecutive month after reaching an all-time low in April. The share of firms reporting decreases in full-time employment (22 percent) exceeded the share reporting increases (14 percent); the majority (59 percent) reported no change. The part-time employment index increased 4 points to -20.7. The majority of firms reported steady part-time employment (56 percent), while 29 percent of the firms reported decreases and 9 percent reported increases. The wages and benefits indicator rose 6 points to 2.3, its first positive reading since March, and the average workweek index fell 5 points to 1.6.
Firms Continue to Report Declines in Prices of Own Goods
Price indicator readings suggest overall increases in prices for inputs and declines in prices for the firms’ own goods and services. The prices paid index increased from 2.0 in June to 9.9 in July (see Chart 2). While most respondents (60 percent) reported stable input prices, 18 percent of the firms reported increases, and 8 percent reported decreases. Regarding prices for the firms’ own goods and services, the prices received index held steady at -13.8 in July. Twenty-three percent of the firms reported decreases in prices received, and 9 percent reported increases. Fifty-seven percent of the firms reported no change in prices for their own goods and services.
Future Indicators Remain Positive
Both future activity indexes suggest that the respondents expect overall improvement in nonmanufacturing activity over the next six months. The diffusion index for future activity at the firm level edged down from a reading of 40.5 in June to 39.1 this month (see Chart 1). Nearly 60 percent of the firms expect an increase in activity at their firms over the next six months, compared with 21 percent that expect decreases. The future regional activity index fell from 37.1 in June to 23.9 in July.
Responses to this month’s Nonmanufacturing Business Outlook Survey suggest signs of improvement in nonmanufacturing activity in the region. The indicators for firm-level general activity, sales/revenues, and new orders are now all in positive territory after reaching all-time lows in the spring; however, the index for full-time employment remained negative. The future activity indexes suggest that respondents expect improvement at their firms and in the region over the next six months.
Posted: July 21, 2020 Tuesday 08:30 AM