Research >> Economics

Philadelphia Fed NonManufacturing Survey Suggest Activity fell sharply in April


Nonmanufacturing firms reported continued weakening in regional nonmanufacturing activity this month, according to results from the Nonmanufacturing Business Outlook Survey. The survey’s current indicators for general activity at the firm level, sales/revenues, new orders, and full-time employment once again fell sharply this month to historic lows, coinciding with ongoing developments related to the coronavirus pandemic. The firms now report overall net decreases in the prices of both their own goods and their inputs, both of which had remained positive last month. The respondents expect overall declines over the next six months, as future activity indexes fell further to historic lows.

Current Indicators Reach Historic Lows
The diffusion index for current general activity at the firm level fell sharply for the second consecutive month from -12.8 in March to -82.5 in April, its lowest reading since this survey began in March 2011 (see Chart 1). Only 3 percent of the firms reported increases in activity (down from 22 percent last month), while 85 percent reported decreases (up from 35 percent last month). The new orders index fell 51 points to -67.2 in April, reaching an all-time low for a second consecutive month. More than 67 percent of the firms reported decreases in new orders, while none reported increases. The sales/revenues index also reached an all-time low, falling from -4.9 to -87.9 in April. No responding firms reported increases in sales/revenues, while 88 percent reported decreases. The regional activity index plummeted to a historic low of -96.4.

Employment Indicators Contract Sharply
The firms reported overall decreases in full-time and part-time employment for the second consecutive month, as both indexes fell further into negative territory. The full-time employment index fell 46 points to -47.5, an all-time low. While nearly 40 percent of the firms reported steady full-time employment levels, the share of firms reporting decreases (52 percent) vastly exceeded the share reporting increases (4 percent). The part-time employment index decreased 48 points to -58.9, also an all-time low. Twenty-nine percent of the firms reported steady part-time employment levels, with the majority of firms reporting decreases (59 percent) and none reporting increases. The wages and benefits indicator plummeted 62 points to -35.7, and the average workweek index fell 45 points to -50.7, historic lows for both.

Firms Report Declines in Prices of Their Own Goods
Price indicator readings fell and now suggest near-steady prices for inputs and declines in prices for the firms’ own goods and services, both hitting historic lows. The prices paid index declined from 6.0 in March to -0.4 in April. While the majority of respondents (52 percent) reported stable input prices, the shares of firms reporting decreases and increases were roughly equal. Regarding prices for the firms’ own goods and services, the prices received index declined 16 points to -15.4 in April. The share of firms reporting decreases in prices received (23 percent) exceeded the share of firms that reported increases (7 percent). More than 38 percent of the firms reported no change in prices for their own goods and services.

Future Indicators Weaken Further
Both future activity indexes suggest that the respondents expect continued declines overall in nonmanufacturing activity over the next six months, with both series reaching all-time low readings for a second consecutive month. The diffusion index for future activity at the firm level decreased from a reading of -16.3 in March to -24.5 this month. More than 32 percent of the firms expect an increase in activity at their firms over the next six months (up from 28 percent last month) compared with 57 percent that expect decreases (up from 45 percent last month). The future regional activity index fell from -36.9 in March to -45.8 in April.

Summary
Responses to this month’s Nonmanufacturing Business Outlook Survey suggest a continued weakening in nonmanufacturing activity in the region. The indicators for firm-level general activity, sales/revenues, new orders, and full-time employment all reached historic lows after falling into negative territory last month. Both price indicators declined further this month, indicating overall price reductions. Future activity indexes once again fell to historic lows and suggest that respondents expect continued declines over the next six months.





Posted: April 21, 2020 Tuesday 08:30 AM




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