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Philadelphia Fed NonManufacturing Activity Suggest Slower Growth in December


Responses to the December Nonmanufacturing Business Outlook Survey suggest a deceleration of nonmanufacturing activity in the region. The indicators for the firm-level general activity, new orders, and sales/revenues indexes posted sizable decreases from last month but remained positive, while the full-time employment index remained stable. The firms 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 themselves and for the region over the next six months, despite a moderation in both series from last month.

Firm-Level Indicators Suggest Slower Growth
The diffusion index for current general activity at the firm level fell sharply from 42.4 in November to 3.0 in December, its lowest reading since February 2014 (see Chart 1). The share of firms reporting increases in activity fell from 55 percent last month to 31 percent this month, while the share of firms reporting decreases rose from 13 percent to 28 percent. The new orders index fell 16 points to 12.7. The share of firms reporting increases in new orders (25 percent) exceeded the share reporting decreases (12 percent). The sales/revenues index fell from 48.9 in November to 13.4 in December. Nearly 36 percent of the responding firms reported increases in sales/revenues, while 22 percent reported decreases. Matching the decline of the firm-level index, the regional activity index fell 39 points to 3.9.

Full-Time Employment Index Remains Stable
The firms continued to report overall increases in full-time employment, although most firms noted steady employment levels. The full-time employment index edged down from 10.3 in November to 9.6 in December. Although most firms (72 percent) continue to report steady full-time employment levels, the share of firms reporting increases (16 percent) was higher than the share reporting decreases (7 percent). The part-time employment index fell 8 points to 10.4, while the wages and benefits indicator fell from 36.0 to 28.7. The average workweek index held steady at 24.5.

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 19 points to 18.3 (see Chart 2). While the majority of firms reported stable input prices (64 percent), the share of firms reporting increases in input prices fell from 38 percent to 21 percent. Regarding the prices for firms’ own goods and services, the prices received index fell from 25.8 in November to 3.8 in December. Nearly 15 percent of the firms reported increases in prices received, while 11 percent reported decreases. More than 60 percent of the firms reported no change in their own prices.

Expectations for Future Growth Soften
Both future activity indexes suggest that firms expect growth to continue over the next six months, although index readings are below their average readings for the year. The diffusion index for future activity at the firm level fell from 53.6 to 37.5 (see Chart 1). Nearly 50 percent of the firms expect an increase in activity at their firms over the next six months, compared with 12 percent that expect a decline. Almost 30 percent of the firms expect no change over the next six months, up from 17 percent last month. The future regional activity index fell 33 points to 19.2.

Summary
Responses to this month’s Nonmanufacturing Business Outlook Survey suggest that nonmanufacturing activity slowed in the region. Indicators for firm-level general activity, new orders, and sales/revenues fell significantly but remained positive, while full-time employment held steady. The respondents remain optimistic about growth over the next six months in their own firms and in the region, although less so than in recent months.






Posted: December 21, 2018 Friday 08:30 AM




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