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June 2008 Business Outlook Survey

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The region’s manufacturing sector continued to contract this month, according to firms polled for the June Business Outlook Survey. Indexes for general activity, new orders, shipments, and employment were all negative this month and registered lower readings than in May. There was an appreciable increase in the share of manufacturers reporting price pressures this month, and about one-third of the firms continued to report higher prices for their own products. The region’s manufacturing executives remained optimistic about future activity, but most future indicators fell back from their May readings.

Indicators Reflect Continued Weakening

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased slightly, from -15.6 in May to -17.1 this month. The index has now been negative for seven consecutive months. Forty-two percent of the firms reported no change in activity from May, but the percentage of firms reporting decreases (34 percent) was twice as large as the percentage reporting increases (17 percent). Other broad indicators also declined this month. The survey’s new orders index remained negative and decreased nine points. The current shipments index also decreased nine points, falling from 2.2 in May to -6.7 this month. Indexes for unfilled orders and delivery times remained negative this month, suggesting continued weakness.

Indicators for employment and hours worked were consistent with the decline in the other broad indicators. The current employment index declined from -1.0 to -6.9, its fifth negative reading in six months. The percentage of firms reporting a decrease in employment (26 percent) exceeded the percentage reporting an increase (19 percent). Edging three points lower, the average workweek index remained negative for the sixth consecutive month.

More Manufacturers Report Higher Input Prices

A larger share of firms — 72 percent, up from 61 percent in May — reported higher input prices this month. The prices paid index jumped 16 points, to 69.3 (see Chart), its highest reading since November 1980. With regard to prices for their own manufactured goods, the largest percentage (56 percent) reported no price change from May, but the percentage of firms reporting higher prices this month (35 percent) was slightly lower than the percentage last month (43 percent). The prices received index edged lower, from 31.6 in May to 29.7 in June (see Chart).

In special questions this month, firms were asked about the impact of higher costs on prices for finished goods (see Special Questions). Firms were asked to provide an estimate of expected price increases for their own manufactured goods over the next three months. Sixty-five percent of the firms expect price increases over the next three months, 15 percent expect price declines, and 20 percent expect prices to remain constant. The average price increase expected over the next three months was 5.4 percent (70 percent of the firms indicated that prices for their finished goods had already increased since the beginning of the year, with an average increase of 3.8 percent for all firms responding). Firms were also asked about shortages of raw materials or intermediate products or delayed deliveries. Twenty-three percent of firms indicated that they were experiencing such problems. Only 9 percent said the problems had affected rates of production.

Outlook Is Less Optimistic

Following significant improvement in expectations over the last two months, the future general activity index retreated in June, falling from a May reading of 28.2 to 21.3. Forty percent of the firms expect growth in activity over the next six months; 18 percent expect a decline. The indexes for future new orders and shipments also declined, falling 15 points and 12 points, respectively. On balance, firms expect only a slight increase in employment levels over the next six months. The percentage of firms expecting to add workers (26 percent) is slightly greater than the percentage expecting to make cuts (18 percent), and the future employment index decreased eight points.


The region’s manufacturing sector showed continued weakness in June: All broad indicators of activity were in negative territory and had declined from their readings in the previous month. Cost pressures remain widespread, with a much larger share of firms reporting increases for input prices this month. The share of firms reporting higher prices for final manufactured goods, however, did not show a corresponding increase this month. Despite the weakness in current activity, manufacturers continue to expect conditions to improve six months out, but they are slightly less optimistic this month.

Special Questions (June 2008)

1. What impact are these recent cost increases having, or expected to have, on the prices of your finished products over the next three months? 
We expect price decreases 14.6%
We expect steady prices 20.2%
We expect price increases 65.2%
  Less than 2.5%   4.5%
  Between 2.5-5%   28.1%
  Between 5-7.5%   13.5%
  Between 7.5-10%   11.2%
  Between 10-15%   3.3%
  Greater than 15%   2.3%
  No response   2.3%
Total 100.0%
Average expected price change 5.4%
Average reported price increase* since the beginning of the year: 3.8%
* Firms were asked what increases in prices have already occurred since January.
2a. Are you currently experiencing shortages or delayed delivery of any critical raw materials or intermediate products?  
Yes 22.5%
No 71.9%
No response 5.6%
Total 100.0%
b. If yes, have these problems affected rates of production? 
Yes 9.0%
No 31.5%
No response 59.5%
Total 100.0%

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Questions about the Business Outlook Survey and its historical data can be addressed to Mike Trebing. E-mail