 Business Outlook Survey November 2003 Activity in the region’s manufacturing sector continues to expand, according to firms surveyed for this month’s Business Outlook Survey. Although indicators for general activity, new orders, and shipments fell from their October readings, they remain at relatively high levels. Manufacturing executives’ outlook for growth over the next six months improved again in November, and many future indicators remain near their highest readings since 1992. Manufacturers Report Growth The survey’s broadest measure of manufacturing conditions, the diffusion index for current activity, declined slightly from 28.0 in October to 25.9 and has now been positive for six consecutive months (see Chart). Although some current indicators fell this month, they continue to reflect solid growth in the region’s manufacturing sector. The current new orders index, which reached an eight-year high in October, fell eight points and the shipments index fell two points from its reading last month. Both indicators have remained positive for five consecutive months. Firms reported higher unfilled orders this month and essentially steady delivery times. The current inventories index remained negative for the second consecutive month, falling nine points to its lowest reading in nine months. There was little appreciable improvement in manufacturing employment in November. Employment indexes fell from their readings in October but still suggest that labor market conditions have stabilized in the past two months. The percentage of firms reporting increases in employment (18 percent) was greater than the percentage reporting decreases (14 percent). The diffusion index of current employment was positive for the second consecutive month, although it declined slightly from last month. The average workweek was mostly steady this month, after increasing in October. Manufactured Goods Prices Are Near Steady Firms reported higher input prices again this month. The index for current prices paid increased modestly, from 22.3 in October to 24.9 in November. Nearly 29 percent of the firms reported paying higher prices for inputs this month; only 4 percent reported paying lower prices. Despite higher costs, firms reported that prices for their own manufactured goods remained nearly steady. The percentage of firms reporting increases (14 percent) was nearly matched by the percentage reporting decreases (11 percent). The current prices received index fell two points this month Outlook Remains Optimistic Expectations for future manufacturing growth improved this month. The diffusion index for future manufacturing activity increased from 55.5 to 63.4 in November, close to its 10-year high in September (see Chart). The future new orders index and shipments index showed improvement this month. Firms expect unfilled orders to increase over the next six months and delivery times to be longer. More firms expect inventories to increase over the next six months (24 percent) than expect them to decrease (15 percent).
Firms’ expectations for future employment growth showed some improvement last month, the future employment index fell from a high of 33.3 in October to 21.6 this month. Thirty percent of the firms indicated that they expect to increase employment over the next six months while only 8 percent indicated they would decrease employment. The outlook for capital spending improved this month. The future capital spending index increased almost eight points to its highest reading in seven months. This month, firms were asked special questions about recent trends in foreign competition and outsourcing of their own business (see Special Questions). Over half of the firms indicated they had lost domestic customers to foreign competition over the last three years. A smaller percentage (26 percent) indicated they had lost foreign customers to foreign competitors over the last three years, and 12 percent indicated that they had gained foreign customers. Twenty-two percent of the manufacturers indicated they have outsourced activities and production abroad, and 71 percent of those firms said the level of outsourcing had increased over the last three years. Finally, 38 percent of the firms reported that their share of inputs from foreign sources had increased over the last three years. Summary Although some current indicators fell modestly from their high levels in October, they continue to suggest that the region’s manufacturing sector is expanding. Firms reported that current activity, new orders, and shipments continued to increase. Respondents reported that employment was steady this month. In general, manufacturing executives’ outlook continued to be optimistic. Moreover, the outlook for both employment and capital spending has shown signs of recent improvement.
Release, Tables, and Chart (pdf format) Return to Main Business Outlook Survey Page Requests for information or comments about the Business Outlook Survey can be sent to mike.trebing@phil.frb.org
|
||||||||||||||||||||||||||||||||||||||||||||||||||