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Philadelphia Fed NonManufacturing Activity Suggest Expansion continues in November
Responses to the November Nonmanufacturing Business Outlook Survey suggest that nonmanufacturing activity in the region continued to expand. The firm-level index of general activity, new orders, and sales/revenues all rose above last month’s readings. In addition, the employment indicators remained positive, while the indexes for prices paid and prices received both increased. The survey’s indexes for future activity suggest that firms expect growth to continue over the next six months.
Current Indicators Strengthen
The survey’s indicators for current activity suggest continued improvement in the nonmanufacturing sector of the regional economy. The diffusion index for current general activity at the firm level increased 5 points in November to 42.4 (see Chart). Nearly 55 percent of the firms reported increases in activity, compared with 13 percent that reported decreases. The new orders index rebounded from its sharp decrease last month, rising 20 points to 28.2. The share of firms reporting increases in new orders (35 percent) exceeded the share reporting decreases (7 percent). The sales/revenues index rose from 41.3 in October to 48.9 in November. Almost 59 percent of the firms reported increases in sales/revenues, while 10 percent reported declines.
Employment Indicators Remain Positive
Responding firms continued to report overall increases in both full-time and part-time employment. Although it remained positive, the full-time employment index fell from 16.6 in October to 10.3 in November, marking a decrease for the second consecutive month. The share of firms reporting increases in full-time employment (19 percent) exceeded the share reporting decreases (9 percent); the majority (64 percent) reported no change. The part-time employment index edged up 4 points to 18.7, and the average workweek index inched down to 24.3. The wages and benefits indicator fell 6 points to 36.0.
Price Indicators Move Upward
The index for prices paid for inputs and the index for prices received for the firms’ own products and services both rose in November. The prices paid index rose 22 points to 37.5, an all-time high for the series. Nearly 38 percent of the respondents reported increases in input prices, while no firms reported decreases. Most firms (52 percent) reported no change in input prices. The prices received index rose from 18.6 in October to 25.8 in November. Nearly 27 percent of the firms reported increases in prices received, while only 1 percent reported decreases. Sixty-three percent of the firms reported no change in their own prices.
Firms’ Forecasts for Own Prices Decrease
In this month’s special questions, the 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). Regarding their own prices, the firms’ median forecast was for an increase of 2.0 percent, down from 3.0 percent when the question was last asked in August. When asked about the rate of inflation for U.S. consumers over the next year, the firms’ median forecast was 2.7 percent, a decrease from the previous forecast of 3.0 percent. The firms expect their employee compensation costs (wages plus benefits on a per employee basis) to rise 3.0 percent over the next four quarters, the same as the previous forecast. The firms’ forecast for the long-run (10-year) inflation rate remained at 3.0 percent.
Firms Anticipate Continued Growth
The respondents continued to expect growth in nonmanufacturing activity over the next six months. The diffusion index for future activity at the firm level increased 10 points to 53.6 (see Chart). Over 67 percent of the firms expect an increase in activity at their firms over the next six months, compared with 14 percent that expect a decline. The future regional activity index more than recovered from its decline last month, rising 22 points to 52.4.
Results from this month’s Nonmanufacturing Business Outlook Survey suggest improvement in regional nonmanufacturing activity. The indicators for firm-level general activity, new orders, and sales/revenues rose, while the firms continued to report overall increases in both full-time and part-time employment. The respondents remain optimistic about growth over the next six months.
Posted: November 20, 2018 Tuesday 08:30 AM