Research >> Economics
Philadelphia NonManufacturing Activity Suggest Steady Growth
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The August Nonmanufacturing Business Outlook Survey suggests that business activity continued to expand at a steady pace. The survey’s broadest indicators of general activity and sales/revenues remained positive and near their readings in July. The employment indexes suggest continued expansion in employment for both full-time and part-time employees. Overall, expectations for growth over the next six months showed continued optimism.
Current Indicators Suggest Steady Growth in Overall Business
The diffusion index for general activity at the firm level decreased modestly, from 20.3 in July to 19.5 in August. The index remains below its historical average reading of 28.7. The sales/revenues index was virtually unchanged this month, at 22.5. New orders, however, fell notably: The index fell nearly 15 points to 14.7. Nearly 38 percent of the firms indicated an increase in new orders in August, compared with 39 percent last month. However, the percentage of firms reporting a decrease in new orders rose from 9 percent to 23 percent.
On balance, firms continued to perceive that regional economic activity is expanding. The regional activity index edged down 4 points, to 24.8, after increasing 18 points in July. The regional general activity index remains slightly higher than its historical average of 23.0.
Firms Expand Both Full-Time and Part-Time Employment
Although the largest percentage of firms (60 percent) reported no change in full-time employment, the percentage of firms reporting an increase in employment (24 percent) was larger than the percentage reporting a decrease (14 percent). The full-time employment index rebounded 8 points to a reading of 10.0 but remains slightly lower than its historical average of 14.1. Nearly the same percentage of firms reported increasing part-time, temporary, and contract workers as reported increasing full-time workers, 25 percent and 24 percent, respectively. The part-time employment index decreased 3 points, to 19.0.
Price Increases Moderate
Price increases for firms’ inputs and own products moderated somewhat from July. Nearly 17 percent of the firms reported higher prices for inputs in August, down from 29 percent in July. The prices paid index fell 13 points to 10.6, well below its historical average of 20.1. With respect to their own prices, 19 percent of the firms reported higher prices in August. The prices received index edged 2 points lower to 10.5, slightly below its historical average of 12.0.
Firms’ Own Prices Expected to Be the Same as the Rate of Inflation
In this month’s special questions, firms were asked about future changes in the prices of their own products, in employee compensation, and in prices their employees and U.S. consumers will pay. The median forecast over the next four quarters was for an increase of 2.5 percent in their own prices, an increase from the 2 percent forecasted in May, when the same questions were last asked. Firms forecast an increase in compensation per employee of 3 percent over the next year, an increase from the 2.5 percent reported in May. Firms expect overall price increases for their employees and for U.S. consumers to be 2 percent and 2.5 percent, respectively, over the next four quarters. For the average rate of inflation for U.S. consumers over the next 10 years, the median response was 2.5 percent, which is unchanged from May.
Forecasts for Future Growth Still Optimistic Overall
The respondents to this month’s survey remained optimistic about future activity over the next six months. Nearly 57 percent of the firms expect increases in activity at their firms over the next six months, and only 13 percent expect decreases. The diffusion index for future activity at the individual firm level fell 3 points, to 43.7 — near its average reading of the previous three months (see Chart 1). Forecasts for growth in the region also deteriorated slightly but remain optimistic overall. The future regional activity index decreased 9 points, to 34.4.
Summary
Results from the Nonmanufacturing Business Outlook Survey suggest continued business expansion in August. The survey’s indicators for firms’ general activity and sales/revenues remained near their positive readings in July. Overall employment grew among the reporting firms, for both full-time and part-time employees. Firms’ six-month forecasts remained optimistic this month, although readings fell modestly from last month.
Posted: August 23, 2016 Tuesday 08:30 AM