skip navigation

Saturday, January 21, 2017

[ – ] Text Size [ + ]  |  Print Page

October 2016 Manufacturing Business Outlook Survey

Results from the October Manufacturing Business Outlook Survey suggest that regional manufacturing conditions continued to improve. Indexes for general activity, new orders, and shipments were all positive this month. But firms reported continued weakness in overall labor market conditions. Firms expect continued growth for manufacturing over the next six months and are becoming more optimistic about employment expansion.

New Orders Pick Up, but Employment Still Not Growing

The index for current manufacturing activity in the region edged down, from a reading of 12.8 in September to 9.7 this month. The index has now been positive for three consecutive months (see Chart 1). Other broad indicators showed notable improvement. The new orders index improved markedly this month, increasing from 1.4 in September to 16.3 in October. The percentage of firms reporting increases in new orders this month rose to 40 percent from 30 percent last month. The current shipments index also improved, rising 24 points to 15.3. The delivery times, unfilled orders, and inventories indexes remained weak, however, with all registering negative readings, although they were less negative than in September.

Chart 1 

Firms reported continued weakness in manufacturing employment. The percentage of firms reporting a decrease in employees in October (17 percent) exceeded the percentage reporting an increase (13 percent). The current employment index edged up slightly to -4.0. The percentage of firms reporting a shorter workweek (19 percent) was slightly greater than the percentage reporting a longer workweek (17 percent), and the average workweek index remained negative at -2.2.

Firms Report Moderated Price Pressures

Although still positive, the prices paid index decreased 14 points to 7.0 (see Chart 2). Although nearly 73 percent of the firms reported that input prices were unchanged, the percentage of firms reporting price increases (15 percent) exceeded the percentage reporting price decreases (8 percent). With respect to prices received for firms’ own manufactured goods, the largest percentage of firms (81 percent) reported no change in prices. The percentage of firms reporting price decreases for their own products (9 percent) exceeded the percentage reporting price increases (6 percent). The index for current prices received declined 13 points, to -3.7.

Chart 2 

Expectations Are Still Positive, and Employment Forecast Improves

Overall, firms remain optimistic about business conditions over the next six months, and prospects for employment continue to be upbeat. The diffusion index for future activity declined from 37.5 in September to 32.6 in October but remains slightly above its average reading over the past 12 months (see Chart 1). Nearly 45 percent of the firms expect increases in activity over the next six months, and 52 percent expect increases in new orders. The future employment index improved for the fourth consecutive month, increasing slightly from 24.9 to 25.9. Nearly 32 percent of the firms said they expected to expand employment over the next six months, while 6 percent expected to reduce employment.

Lower Rates of Utilization Are in Evidence

For this month’s special questions, manufacturers were asked about current capacity utilization rates compared with the same time last year (see Special Questions). The average capacity utilization rate reported was nearly 74 percent. The responding firms indicated, however, that the current rate was lower than that from one year earlier (75 percent). For the U.S., the capacity utilization rate for the manufacturing sector, overall, is estimated to be almost 75 percent, slightly lower than one year ago.

Firms were also asked about their plans for different categories of capital spending next year. For only one category (noncomputer equipment), the share of firms expecting to increase spending was higher than the share of firms expecting to decrease spending. More firms expected decreases than expected increases next year for software, computer and related hardware, structures, and energy-saving investments. Firms with higher plant utilization rates were more likely to report plans to increase investments. For example, the current utilization rate among firms expecting to increase spending on structures (83 percent) was notably higher than those expecting to decrease spending on structures (70 percent).

Summary

Responses to the October Manufacturing Business Outlook Survey suggest continued improvement in the region’s manufacturing sector. Indexes for general activity, new orders, and shipments all indicated expansion this month. However, firms reported continued reductions in overall employment. Firms remained optimistic about increases in overall business activity over the next six months.

Special Questions (October 2016)

1. Which of the following best characterizes your plant’s current capacity utilization rate (current and last year)?
Capacity Utilization Rate *
Current
(% of reporters)
Same Time Last Year
(% of reporters)
Less than 60%
17.2
13.6
60%–70%
20.7
18.6
70%–80%
36.2
35.7
80%–90%
13.8
18.6
Greater than 90%
12.2
13.6
Average utilization rate
73.5
75.3
U.S. utilization rate**
75.3
75.9

* Firms provided more specific rates of utilization than shown in the provided ranges.
** Capacity Utilization: U.S. Manufacturing (NAICS) "Current" shows the rate for September 2016; "Same Time Last Year" shows the rate for October 2015. Sources: Federal Reserve Board, Haver Analytics

2. Do you expect the following capital expenditure categories over the next year (2017) to be higher than, the same, or lower than in the current year?
 
Higher
(% of reporters)
Same
(% of reporters)
Lower
(% of reporters)
Diffusion Index
Noncomputer equipment
34.5
43.1
25.9
8.6
Software
25.9
46.6
27.6
-1.7
Computer and related hardware
20.7
56.9
24.1
-3.4
Structures
17.2
53.4
27.6
-10.3
Energy-saving investments
10.3
65.5
20.7
-10.3
Other
0.0
36.2
10.3
-10.3
Exhibit 1: Average percent capacity utilization rates for firms in categories above.
 
Capacity Utilization Rate for Higher Spending in Category
Capacity Utilization Rate for Same Spending in Category
Capacity Utilization Rate for Lower Spending in Category
Noncomputer equipment
78.0
71.5
71.8
Software
79.3
75.1
65.7
Computer and related hardware
76.5
75.6
68.3
Structures
83.1
73.0
70.0
Energy-saving investments
85.8
74.0
65.8
Average
80.5
73.8
68.3

View Complete Writeup

A complete writeup of this survey, including all tables, is available in PDF format.

October 2016 PDF

E-Mail Notification

Subscribe to the survey through our e-mail notification system.

Sign Up

Questions?

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