PHILADELPHIA--(BUSINESS WIRE)--Manufacturing activity in the region increased modestly in January, according to firms responding to this month s Manufacturing Business Outlook Survey. The survey s current indicators for general activity and new orders fell from their readings in December, suggesting a slower pace of growth. Firms reported continued moderation in price pressures, attributable to lower energy costs. Overall, firms reported that lower energy prices were having overall net positive effects on manufacturing business. The survey's indicators of future activity show continued optimism about continued growth over the next six months.
Indicators Suggest Slower Pace of Growth
The survey s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased 18 points, from a revised reading of 24.3 in December to 6.3 this month.* Demand for manufactured goods, as measured by the current new orders index, decreased 5 points, from a revised reading of 13.6 last month to 8.5 this month. Shipments also fell, with its index falling 22 points to -6.9, its first negative reading since February 2014. Firms reported shorter delivery times and a decrease in unfilled orders this month, on balance.
Firms responses suggest weaker labor market conditions in January. The percentage of firms reporting a decrease in employees (15 percent) exceeded the percentage reporting an increase (13 percent) for the first time in 19 months. The current employment index fell 10 points, from 8.4 to -2.0. Firms also reported reductions in the workweek: The percentage of firms reporting a shorter workweek (23 percent) was greater than the percentage reporting a longer workweek (16 percent).
Firms Report Continued Moderation in Input Prices
Input price pressures continued to decline for reporting manufacturers: The prices paid index fell 5 points to 9.8 in January and has now declined 15 points over the past three months. Most firms (68 percent) reported that input prices were unchanged. With respect to prices received for manufactured goods, nearly the same percentage of firms reported price reductions (8 percent) as reported price increases (8 percent). The prices received index fell 10 points to just below zero, its lowest reading in 21 months. The largest percentage of firms (84 percent) reported no change in manufactured good prices.
Most Future Indicators Remain at High Levels
The diffusion index for future activity edged up by less than 1 point, to 50.9, in January and has remained near its current level over the past five months. The future index for new orders held steady, but the future shipments index fell 7 points. More than 52 percent of the firms are expecting no change in their employment levels over the next six months, while the percentage expecting increases (33 percent) was substantially greater than the percentage expecting employment decreases (8 percent). The future employment index decreased slightly, from a revised reading of 24.9 in December to 24.0 in January.
Energy Price Reductions Are Having a Net Positive Effect
In this month s special questions, firms were asked about the effects of lower oil prices on manufacturing business (see Special Questions). The responses indicate that the effects have been positive for most firms. Nearly 63 percent of the firms reported positive effects, while 16 percent reported negative effects. The largest percentage (39 percent) characterized the effect as slightly positive. The most frequently cited impact was that falling energy prices were lowering the costs of production (57 percent of the firms). For 23 percent of the firms, energy cost reductions were increasing sales margins. On the negative side, nearly one-third of the firms indicated they had experienced declines in business from energy production-related customers, but 10 percent reported demand increases from nonenergy-related customers. With regard to the firms own expectations for energy prices over the next six months, firms were evenly divided about whether there would be an increase or decrease in future demand for their manufactured products.
The Manufacturing Business Outlook Survey suggests a slower pace of expansion of the region s manufacturing sector in January. The indicators for general activity and new orders both suggest moderating growth. Firms reported an overall reduction in shipments and labor usage for January. Respondents also indicated that price pressures were reduced and that lower energy prices are having net beneficial effects. Firms remain optimistic about increases in overall business and employment over the next six months.
The February 2015 Manufacturing Business Outlook Survey will be released on February 19, 2015, at 10:00 a.m. ET.
* The survey s annual historical revisions, which incorporate new seasonal adjustment factors, were released on January 8, 2015. The full set of revised historical data is available at www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/historical-data/revisions/historical-revisions-2015.cfm.
January vs. December
Six Months from Now vs. January
What is your evaluation of the level of general business activity
|Company Business Indicators|
|Number of Employees||8.4||13.1||71.7||15.1||-2.0||24.9||32.8||52.3||8.8||24.0|
|Average Employee Workweek||4.1||16.3||60.3||23.0||-6.7||16.4||22.3||59.7||9.2||13.0|
(1) Items may not add up to 100 percent because of omission by respondents.
(2) All data are seasonally adjusted.
(3) Diffusion indexes represent the percentage indicating an increase minus the percentage indicating a decrease.
(4) Survey results reflect data received through January 13, 2015.
Special Questions (January 2015)
1. Overall, what impacts have falling energy prices had on your business (Choose only one)
|Decreased demand from our energy production-related customers||32.9|
|Increased demand from our nonenergy production-related customers||10.0|
|Lowered our firm s cost of production||57.1|
|Lowered our firm s revenues||10.0|
|Increased our sales margins||22.9|
|Decreased our sales margins||5.7|
*Percentages for Question 2 do not add up to 100 percent because of individual firms selecting multiple responses.
For a Complete Version of this BUSINESS WIRE Press Release