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Philadelphia Fed NonManufacturing Activity Suggest Continued Expansion in October
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Responses to the October Nonmanufacturing Business Outlook Survey suggest continued expansion of nonmanufacturing activity in the region. The indicators for firm-level general activity, new orders, and full-time employment remained positive but fell, while the sales/revenues index remained relatively stable. The respondents continued to report overall increases in prices of both their own goods and their inputs, although at lower levels than in recent months. The firms anticipate growth for their own firms and the region over the next six months.
Firms Reported Continued Expansion
The diffusion index for current general activity at the firm level fell from 46.8 in September to 37.2 in October (see Chart 1). More than 53 percent of the firms reported increases in activity, compared with 16 percent that reported decreases. The new orders index fell nearly 20 points to 7.8, its lowest level since July 2015. The share of firms reporting increases in new orders (25 percent) exceeded the share reporting decreases (17 percent). The sales/revenues index edged down from 42.8 in September to 41.3 in October. Nearly 56 percent of the responding firms reported increases in sales/revenues, while 14 percent reported decreases. The regional activity index remained stable at 37.6.
Employment Indicators Weakened
The survey’s labor market indicators fell in October. The full-time employment index decreased from 36.7 in September to 16.6 in October, coming down from last month’s all-time high for the series. Although most firms (62 percent) continue to report steady full-time employment levels, the share of firms reporting increases (26 percent) was higher than the share reporting decreases (9 percent). The part-time employment index fell 6 points to 15.0, while the wages and benefits indicator fell from 48.1 to 41.9. The average workweek index edged up from 25.1 to 25.5.
Price Indicators Moderated
Both price indicators moderated from last month’s readings but still suggest overall increases in prices for inputs and for firms’ own goods and services. The prices paid index fell 11 points to 15.0. While the majority of firms reported stable input prices (63 percent), the share of firms reporting increases in input prices fell from 28 percent to 18 percent. Regarding the prices for firms’ own goods and services, the prices received index fell from 24.3 in September to 18.6 in October. While 24 percent of the firms reported increases in prices received, nearly 6 percent reported decreases. More than 53 percent of the firms reported no change in their own prices.
Expectations for Growth Tempered Somewhat
Both future activity indexes suggest that firms expect growth to continue over the next six months, although a higher share of firms expect decreases this month than did last month. The diffusion index for future activity at the firm level fell from 53.6 to 43.9 (see Chart 1). More than 59 percent of the firms expect an increase in activity at their firms over the next six months, compared with 15 percent that expect a decline. The future regional activity index fell 15 points to 30.3.
Summary
Responses to October’s Nonmanufacturing Business Outlook Survey indicate continued expansion of nonmanufacturing activity in the region, although indicators for firm-level general activity and new orders fell, while the indicator for sales/revenues remained stable. Despite lower readings in the respective indexes compared with last month, responding firms continued to report overall increases in full-time employment and remain optimistic about growth over the next six months.
Posted: October 23, 2018 Tuesday 08:30 AM