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Philadelphia NonManufacturing Activity Suggest a Pickup in Growth in January
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Respondents to the January Nonmanufacturing Business Outlook Survey reported that business activity continued to expand in the region. The firm-level general activity index rose for the second consecutive month, and the indicator for new orders also improved. The sales/revenues index decreased but remained positive. However, the full-time employment index fell to near zero. More firms reported increases in prices for their own products this month compared with last month, pushing up the prices received index. The diffusion index for future general activity at the firm level rose sharply.
Firm-Level Indicators Suggest a Pickup in Growth
The diffusion index for current general activity at the firm level increased for the second consecutive month, rising 9 points from a revised reading of 20.6 in December to 29.3 in January (see Chart).* More than 46 percent of the firms reported an increase in activity this month, while 17 percent reported a decrease. The new orders index also improved, but the sales/revenues index edged down. The diffusion index for new orders increased 9 points to 21.6, as the share of firms reporting an increase in new orders rose from 28 percent in December to 37 percent in January. Meanwhile, the share of firms that indicated an increase in sales/revenues (42 percent) exceeded the share that indicated a decrease (18 percent). Nonetheless, the sales/revenues index fell by 5 points to 23.9. The firms’ perceptions of activity in the region also weakened, as the regional activity index fell 10 points to 19.5.
Full-Time Employment Levels Hold Mostly Steady
Most firms (73 percent) reported no change in full-time employment. The share of firms that reported an increase in full-time employment (11 percent) was about the same as the share that reported a decrease (12 percent), and the full-time employment index fell 11 points to near zero. The part-time employment index edged up, however, from 12.1 in December to 15.5 in January. The average workweek index fell 4 points to 19.2, while the wages and benefits index fell 4 points to 29.9.
Firms Report Increases in Prices
The price indicators rose for the second consecutive month, as firms continued to report increases in both prices received and prices paid. The prices received index rose 7 points to 17.3. In January, 20 percent of the firms reported an increase in prices received for their products, and only 3 percent reported a decrease. With respect to prices paid by the firms, a higher share reported an increase in prices for inputs (32 percent). Nonetheless, the prices paid index increased less than a full point to 27.8.
Capital Expenditures Rise
The indexes for spending on equipment and software and on physical plant rose. The index for equipment and software spending increased 7 points to 27.8. The share of firms reporting increased spending on equipment and software (31 percent) exceeded the share reporting decreased spending (3 percent). The index for physical plant spending rose 5 points to 27.2.
Firms Report That Demand Rose in 2017
In this month’s special question, firms were asked to assess the underlying demand for their products and/or services over the course of the past year. Most firms (61 percent) reported an increase in underlying demand; 46 percent characterized the increase as modest. More than 20 percent reported no change, and 19 percent reported a modest decrease.
Firms Are More Optimistic About Future Growth
The respondents to this month’s survey expressed a high degree of optimism about activity over the next six months. The diffusion index for future activity at the firm level rose to 62.6, a 17 point improvement over the revised December reading (see Chart). More than 68 percent of the respondents expect an increase in activity at their firms, while 6 percent expect a decrease. The respondents’ views about overall growth in the region over the next six months also strengthened: The future regional activity index increased 7 points to 45.4.
Summary
The firms responding to this month’s Nonmanufacturing Business Outlook Survey reported a pickup in the pace of business activity at their companies. Although the index for sales/revenues fell, the indicators for current general activity at the firm level and new orders rose. The index for full-time employment fell to a near-zero reading, and the indicators for prices received and prices paid rose. The firm-level future activity index suggests a high degree of optimism.
Posted: January 23, 2018 Tuesday 08:30 AM