Research >> Economics

Philadelphia Fed NonManufacturing Activity Suggest suggest continued return to expansion in March


Responses to the March Nonmanufacturing Business Outlook Survey suggest a continued return to expansion in nonmanufacturing activity in the region. The indexes for general activity at the firm level, new orders, sales/revenues, and full-time employment all rose for the second consecutive month. The firms continued to report overall increases in prices of both their own goods and their inputs. The respondents continued to anticipate growth for themselves and for the region over the next six months.

Current Indicators Further Strengthen
The diffusion index for current general activity at the firm level rose 9 points to 38.3 in March (see Chart 1). Readings of this index have returned to 2018 levels, following a slightly negative reading back in January. The new orders index rose 8 points to 24.5. The share of firms reporting increases in new orders (32 percent) was higher than the share reporting decreases (7 percent). The sales/revenues index strengthened even further, rising 23 points to 42.5 in March. Nearly 59 percent of the responding firms reported increases in sales/revenues, while only 16 percent reported decreases. The regional activity index rose 12 points to 21.7.

Full-Time Employment Index Near All-Time High
The firms continued to report overall increases in full-time employment. The full-time employment index rose 11 points to 33.3 in March, just below its all-time high reading of 33.7 in September 2018. Half of the reporting firms (50 percent) reported steady full-time employment levels, while the share of firms reporting increases (40 percent) was higher than the share reporting decreases (7 percent). The part-time employment index edged down to 18.5, while the wages and benefits indicator rose 5 points to 43.8. The average workweek index rose 11 points to 29.9.

Firms Continue to Report Overall Price Increases
Both price indicators rose from last month’s readings, suggesting overall increases in prices for inputs and for the firms’ own goods and services. The prices paid index rose 12 points to 28.0 (see Chart 2). Although the majority of respondents (56 percent) reported stable input prices, 32 percent of the respondents reported increases, while only 4 percent reported decreases. Regarding prices for firms’ own goods and services, the prices received index rose 2 points from February to 11.0 in March. While 19 percent of the firms reported increases in prices received, 8 percent reported decreases. More than 63 percent of the firms reported no change in their own prices.

Firms Anticipate Continued Growth
Both future activity indexes suggest that firms expect growth to continue over the next six months. The diffusion index for future activity at the firm level fell from a reading of 58.9 in February to 45.8 this month (see Chart 1). While only 11 percent of the firms expect a decrease in activity at their firms over the next six months, the share of firms that expect an increase fell from 66 percent last month to 57 percent this month. Thirty-two percent of the firms expect no change over the next six months. The future regional activity index held mostly steady at 27.2.

Summary
Responses to this month’s Nonmanufacturing Business Outlook Survey suggest that nonmanufacturing activity expanded further in the region. Indicators for firm-level general activity, new orders, sales/revenues, and full-time employment rose for the second consecutive month. Respondents remain optimistic about growth over the next six months in their own firms and in the region.






Posted: March 26, 2019 Tuesday 08:30 AM




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