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Philadelphia Fed Outlook Reported Activity Improved in January
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Manufacturing activity in the region increased this month, according to results from the January Manufacturing Business Outlook Survey. The survey’s indicators for current activity, new orders, shipments, and employment were all positive and increased from their readings in December. The survey’s future activity indexes remained at relatively high readings, suggesting continued optimism about growth for the next six months.
Current Indicators Improved This Month
The diffusion index for current general activity increased nearly 15 points this month, from a revised reading of 2.4 in December to 17.0. The percentage of the firms reporting increases (39 percent) was greater than the percentage reporting decreases (22 percent). The indexes for current shipments and new orders also moved higher: The current new orders index increased 7 points, and the shipments index increased 8 points. The indexes for unfilled orders and delivery times changed from positive to negative readings this month, suggesting decreased unfilled orders and shorter delivery times. On balance, the firms also reported a slight decline in inventories.
Manufacturers continued to report expanding employment this month. The employment index increased 3 points to 19.3. Nearly 28 percent of the firms reported higher employment, while 9 percent reported lower employment. The average workweek index remained positive but edged down 3 points.
Price Indexes Edge Higher
The firms continued to report overall increases in the prices paid for inputs, with the index rising 6 points to 22.1 (see Chart 2). Nearly 27 percent of the respondents reported higher input prices; only 5 percent reported lower input prices. The largest percentage of the firms (68 percent) reported steady input prices. The current prices received index, reflecting the manufacturers’ own prices, increased 4 points to 14.7. More than 18 percent reported higher prices for their manufactured products, 3 percent reported lower prices, and over 78 percent reported no change in their prices.
Firms Expect to Increase Production in the Near Term
In the Special Questions this month, the firms were asked to characterize demand for their products over the past few months and to forecast their production for the first quarter of the year (see Special Questions). Most firms (44 percent) reported an increase in underlying demand, but 31 percent characterized underlying demand as decreasing in recent months. Over 62 percent of the firms anticipate increasing production in the first quarter, while 33 percent expect decreases. Among the firms expecting an increase in production, 25 percent indicated that this would be accomplished with additional workers. But most indicated higher production would be accomplished without additional hiring: Thirty-three percent would increase the hours of existing workers, while 36 percent indicated production could be increased with higher productivity of existing workers.
Firms Remain Generally Optimistic
The diffusion index for future general activity edged up 4 points, from a revised reading of 34.8 in December to 38.4 in January. More than 49 percent of the firms expect increases in activity over the next six months, while 11 percent expect declines. The future new orders and shipments indexes also increased, by 8 points and 4 points, respectively. The future employment index decreased 3 points this month, but the firms remain optimistic about future hiring overall: One-third of the firms expect higher employment over the next six months. The firms were more optimistic about future capital spending: The future capital expenditures index increased 7 points, with 39 percent expecting higher capital spending over the next six months.
Summary
The January Manufacturing Business Outlook Survey indicated growth in the region’s manufacturing sector this month. All of the survey’s broad indicators remained positive and increased from their readings in December. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.
Posted: January 16, 2020 Thursday 08:30 AM