Research >> Economics
Philadelphia NonManufacturing Activity continued to expand in November
|
Respondents to this month’s Nonmanufacturing Business Outlook Survey reported that regional nonmanufacturing activity continued to expand, but with a slowing in the pace of growth. The indexes for current firm-level activity and sales/revenues fell but remained positive, while the index for new orders rose. The index for full-time employment also rose. The survey responses indicated overall price increases for inputs and flat prices for the respondents’ own products and services. The respondents remained optimistic about activity over the next six months.
Firms Report a Continuation in Growth
The index for general activity at the firm level edged down from 24.7 in October to 16.4 in November (see Chart). Although this index has declined for three consecutive months, it remained positive. Nearly 39 percent of the firms reported increases in activity this month, compared with 22 percent that reported a decrease in activity. The regional activity index also remained positive but fell 13 points to 19.3. This is the lowest reading for this indicator this year.
Other indicators for current activity suggest slower sales/revenues growth but an improvement in the pace of new orders. The sales/revenues index fell from 25.5 in October to 15.8 in November. More than 38 percent of the firms indicated higher sales/revenues, down from 48 percent in the prior month, while 22 percent of the firms reported a decrease, the same as the prior month. The new orders index rose 5 points to 16.5 in November. Nearly 35 percent of the firms indicated increases in new orders, up from 28 percent in the prior month, and 18 percent reported decreases.
Indicators for Employment Improve
The indicators of labor demand in the survey showed a general improvement in November. The index for full-time employment rose 4 points to 21.5, its highest reading since April. Almost 30 percent of the firms reported an increase in full-time employment, while 8 percent reported a decrease. Although the part-time employment indicator fell 4 points to 10.8, the average workweek index rose from 10.6 in October to 18.8 in November. The wage and benefit costs indicator increased 3 points to 43.4, with 46 percent of the firms reporting increases this month compared with 3 percent reporting decreases.
Firms Report Little Change in Prices Received
Firms reported increases in the prices paid for inputs and little change in prices received for their own products and services in November. The prices paid index fell 5 points but remained positive at 23.2. Nearly 25 percent of the firms reported increases in prices paid, while only 2 percent reported decreases. The prices received index fell to a near-zero value, with 68 percent of the respondents reporting no change and a roughly equal percentage reporting increases and decreases (8 percent).
Expectations for Near-Term Inflation Fall
In this month’s special questions, firms were asked to forecast the changes in the prices of their own products and services and for U.S. consumers over the next four quarters (see Special Questions). The median forecast was for an increase in their own prices of 2.0 percent, down slightly from 2.2 percent when the same question was last asked in August. Firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise at a 3.0 percent pace over the next year. When firms were asked about the average rate of inflation for U.S. consumers over the next year, the median response was 2.0 percent, down from 2.9 percent in August. The firms also provided a 10-year inflation forecast, and the median remained at 3.0 percent.
Firms Expect Growth to Continue
The respondents to this month’s survey remained optimistic in their outlook over the next six months. The diffusion index for future activity at the firm level rose 5 points to 42.8 (see Chart). Nonetheless, this indicator remained below its historical average (49.7) and has clearly retreated from a peak of 68 in January. Nearly 54 percent of the firms expect increases in activity at their firms over the next six months, while 11 percent expect a decline. The future regional activity index fell 12 points to 31.3.
Summary
Results from this month’s Nonmanufacturing Business Outlook Survey suggest continued business expansion. The indicators for firm-level general activity and sales/revenues edged down, while the indicator for new orders rose. Firms also reported increases in full-time employment and higher input prices. Forecasts for the next six months remain optimistic.
Posted: November 21, 2017 Tuesday 08:30 AM