Research >> Economics
Philadelphia Nonmanufacturing Activity Continues to Expand in March
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Responses to this month's Nonmanufacturing Business Outlook Survey suggest that local nonmanufacturing activity continued to expand in March. The survey's indicators for general activity, new orders, and sales or revenues decreased slightly but remained at elevated levels. Responding firms continue to be optimistic about activity over the next six months.
Nonmanufacturing Activity Continues to Expand
The diffusion index for current activity at the firm level decreased from 51.0 in February to 44.2 in March. More than 65 percent of the respondents reported increases in activity, up slightly from 61 percent last month. Firms perceived increasing activity for the region as well; as a result, the regional general activity index edged up to 48.8. The more than 55 percent of the respondents who indicated increasing activity in the region far exceeded the 7 percent who indicated decreasing activity.
New Orders and Sales or Revenues Were Positive
Demand for firms' services, as measured by the new orders and sales/revenues indexes, continued to grow this month. The new orders index edged down from 32.7 in February to 30.2 in March. The share of firms reporting increases in new orders this month (49 percent) exceeded the share of firms reporting decreases (19 percent). The sales/revenues index also decreased, falling 8 points to 34.9. The percentage of firms reporting decreases in sales or revenues grew to 23 percent from 14 percent last month; however, more than 58 percent of the firms reported increases.
Employment Indexes
Labor Market Indicators Grew
Survey results suggest generally positive labor market conditions this month. The full-time employment index rose to its highest reading for the year, increasing 7 points to 20.9. The percentage of firms reporting increases in full-time staff (28 percent) exceeded the percentage of firms reporting decreases (7 percent). The part-time employment index changed little, edging up to 25.6 in March from 24.5 in February. Firms also reported increases in hours, as the workweek index increased 7 points, to 23.3.
Firms Reported Increased Price Pressures
The prices of inputs rose for firms in March, on balance, as the index for prices paid rose for the third consecutive month, to 23.3. The percentage of respondents reporting increases in input prices (33 percent) exceeded the percentage of respondents reporting decreases (9 percent), and most respondents (49 percent) reported no change. Firms were nearly evenly split on changes in prices for their own goods. More than 23 percent of the respondents reported higher prices received, slightly exceeding the nearly 21 percent of the respondents who reported lower prices received. However, the prices received index decreased 18 points, to 2.3, as the share of respondents reporting lower prices this month (21 percent) increased from last month (6 percent).
Capital Expenditures Grew Slightly
Firms continued to report slight increases, on net, in capital expenditures this month, but both spending indexes decreased from last month's readings. The index for expenditures on physical plant fell 10 points, to 2.3. The percentage of respondents reporting increases (9 percent) narrowly exceeded the percentage reporting decreases (7 percent). The equipment and software expenditures index also decreased, from 24.5 last month to 18.6 this month. More than a quarter of the respondents reported increases in equipment and software spending.
Future Indicators Remain High
Responding firms continued to be optimistic about activity over the next six months; however, index readings for both future activity indicators decreased from last month. The firm-level future general activity index decreased nearly 10 points, to 72.1, nearing its December 2014 reading. More than 72 percent of the firms expect activity to increase over the next six months; none of the respondents expect activity six months from now to decrease. The future activity index for the region decreased slightly but also remained high, at 79.1.
Summary
The March Nonmanufacturing Business Outlook Survey results suggest continued increased activity in the region among nonmanufacturing firms. Indicators for general activity at both the company and regional levels, new orders, and sales/revenues remained high, and indicators for employment continued to show improvement. Firms remained optimistic about future growth.
Posted: March 24, 2015 Tuesday 10:00 AM