Philadelphia Federal Reserve Survey Reports Manufacturing Activity in the Region Increased Modestly

April 2015

PHILADELPHIA--(BUSINESS WIRE)--Manufacturing activity in the region increased modestly in April, according to firms responding to this month’s Manufacturing Business Outlook Survey. Indicators for general activity and new orders were positive but remained at low readings. Firms reported overall declines in shipments this month, but employment and work hours increased at the reporting firms. Firms reported continued price reductions in April, with indicators for prices of inputs and the firms’ own products remaining negative. The survey’s indicators of future activity suggest a continuation of modest growth in the manufacturing sector over the next six months.

Indicators Suggest Slight Growth

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 5.0 in March to 7.5 this month. The index has hovered in a single-digit range for the first four months of this year. The demand for manufactured goods, as measured by the survey’s current new orders index, was virtually flat this month. The index was only slightly positive and fell 3 points from its reading in March. The current shipments index rebounded 6 points but remained negative for the second consecutive month.

Firms’ responses suggest some improvement in labor market conditions compared with March. The current employment index increased 8 points, to 11.5, its highest reading in five months. The percentage of firms reporting an increase in employees in April (21 percent) exceeded the percentage reporting a decrease (9 percent). Firms reported modest increases in the workweek: The percentage of firms reporting a longer workweek (14 percent) was greater than the percentage reporting a shorter workweek (10 percent) for the first time in four months.

Some Firms Report Price Reductions

Input price pressures continued to moderate for reporting manufacturers: The prices paid index fell 5 points, to -7.5, its second consecutive negative reading and lowest reading since June 2009. Although 77 percent of the firms reported that input prices were unchanged, the percentage of firms reporting price reductions (14 percent) exceeded those reporting increases (6 percent). With respect to prices received for manufactured goods, the largest percentage of firms (80 percent) reported no change in prices. The percentage of firms reporting price reductions (11 percent) exceeded those reporting price increases (7 percent) for the fourth consecutive month.

Manufacturers Expect Growth over the Next Six Months

The diffusion index for future activity increased from 32.0 in March to 35.5 this month but remained well below the readings over the past year. The future indexes for new orders fell 4 points, while the future shipments index increased 2 points. The future employment index showed some improvement this month, increasing 6 points. Although nearly 53 percent of the firms are expecting no change in their employment levels over the next six months, the percentage expecting increases in employment rose from 25 percent in March to 32 percent this month.

In this month’s special questions, firms were surveyed about the effects of the stronger dollar on their manufacturing business. On balance, the stronger dollar since last year is having negative effects on manufacturing, although the largest share of firms characterized the effect as slight, overall.

Summary

The Manufacturing Business Outlook Survey suggests continued modest expansion of the region’s manufacturing sector in April. The indicators for general activity and new orders both suggest expansion, but at a very modest pace. Firms, however, reported an increase in employment this month. Some respondents continued to report downward price pressures for inputs. For their own manufactured products, more firms reported price decreases than reported price increases, although 80 percent of the firms reported steady prices. Indicators reflecting firms’ expectations for the next six months improved modestly this month, and the firms were notably more optimistic in their forecast for future employment growth.

MANUFACTURING BUSINESS OUTLOOK SURVEY April 2015	April vs. March					Six Months from Now vs. April
	Previous Diffusion Index	Increase	No Change	Decrease	Diffusion Index	Previous Diffusion Index	Increase	No Change	Decrease	Diffusion Index
What is your evaluation of the level of general business activity?	5.0	28.0	45.6	20.6	7.5	32.0	44.5	44.4	9.0	35.5
Company Business Indicators
New Orders	3.9	32.1	36.5	31.4	0.7	34.3	42.3	42.4	11.5	30.8
Shipments	-7.8	28.9	39.2	30.7	-1.8	32.3	47.7	35.3	13.8	34.0
Unfilled Orders	-13.8	13.7	62.0	20.9	-7.1	8.7	19.4	70.6	2.8	16.6
Delivery Times	-13.4	8.3	81.7	7.8	0.5	1.9	10.7	74.8	10.8	-0.2
Inventories	-2.3	17.5	66.6	16.0	1.5	-0.6	13.7	61.6	19.1	-5.4
Prices Paid	-3.0	6.2	76.5	13.7	-7.5	27.5	22.8	69.8	2.9	19.9
Prices Received	-6.4	7.0	79.6	11.1	-4.1	7.4	17.3	69.0	6.6	10.7
Number of Employees	3.5	20.6	70.3	9.1	11.5	14.4	31.7	52.7	11.1	20.6
Average Employee Workweek	-11.4	13.8	71.3	10.3	3.4	-4.2	9.9	80.3	7.5	2.4
Capital Expenditures	--	--	--	--	--	16.4	27.0	55.8	11.1	15.8
NOTES:
(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 April 14, 2015.