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Philadelphia Fed NonManufacturing Activity Suggest Continued to Expand in July
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Responses to the July Nonmanufacturing Business Outlook Survey suggest that nonmanufacturing activity continued to expand in the region. The firm-level index of general activity and new orders decreased but remained elevated, while the sales/revenues index rose moderately. The full-time employment index continued its climb during recent months. Although prices were muted compared with last month, firms continued to report overall increases in prices of both their own goods and their inputs. The respondents anticipated growth for their own firms and the region over the next six months, despite a moderation in both series from last month.
Current Indicators Remain Elevated
The diffusion index for current general activity at the firm level fell from 40.7 in June to 35.5 in July but remains above its historical average of 28.4 (see Chart 1). More than 52 percent of the firms reported increases in activity, compared with 17 percent that reported decreases. The new orders index fell 4 points to 31.5. The share of firms reporting increases in new orders (42 percent) exceeded the share reporting decreases (11 percent). After falling in June, the sales/revenues index rebounded from 24.6 in June to 35.6 in July. Over 51 percent of the responding firms reported increases in sales/revenues, while 16 percent reported decreases. The regional activity index rose, climbing 5 points to 44.3.
Employment Indicators Remain Stable
Overall, most firms continued to increase employment levels for both full-time and part-time employment. The full-time employment index increased from 19.9 in June to 29.5 in July, its highest reading ever. Although most firms (56 percent) continue to report steady full-time employment levels, the share of firms reporting increases (35 percent) was considerably higher than the share reporting decreases (6 percent). The part-time employment index decreased 11 points to 10.9, while the average workweek index nearly doubled to 29.2. The wages and benefits indicator edged down from 51.1 to 47.5 but remains elevated.
Price Indicators Moderate
Both price indicators decreased this month, following two consecutive months of increases for the two series. The prices paid index fell 8 points to 28.6 but remained above its historical average of 21.1 (see Chart 2). Although the majority of firms (53 percent) reported stable input prices, 32 percent of the respondents reported increases, while only 4 percent reported decreases. The prices received index fell notably from 28.5 in June to 12.4 in July, close to its historical average of 12.0. While 26 percent of the firms reported increases in prices received, 13 percent reported decreases. Half of the firms reported no change in their own prices.
Expectations for Future Growth Soften
Future activity indexes decreased after rising for the two prior months, both falling below their long-term averages. The diffusion index for future activity at the firm level decreased from 58.2 to 41.5 (see Chart 1). Over 60 percent of the firms expect an increase in activity at their firms over the next six months, compared with 19 percent that expect a decline. The future regional activity index fell 22 points from last month to 31.5.
Summary
Responses to this month’s Nonmanufacturing Business Outlook Survey suggest that nonmanufacturing activity continued to expand in the region. The indicators for firm-level general activity and new orders remained elevated, while the firms reported overall increases in both full-time and part-time employment. The respondents remain optimistic about growth over the next six months in their own firms and in the region.
Posted: July 24, 2018 Tuesday 08:30 AM