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October 2017 Nonmanufacturing Business Outlook Survey

Respondents to the Nonmanufacturing Business Outlook Survey reported continued growth in the region’s nonmanufacturing sector in October. The survey’s indicator for current activity changed little, and while indicators for new orders and sales/revenues fell, they remained positive. The survey’s indicator for full-time employment rose. More firms reported an uptick in prices paid for inputs and for prices received for their own goods and services this month compared with last month. Although the future activity index at the firm level fell, most of the respondents remained optimistic about growth over the next six months.


Current and Future General Activity Indexes for Firms

Current Activity Shows Growth

The index for current activity at the firm level edged down 1 point to 24.7 this month (see Chart 1). Despite a second consecutive decline, this index’s reading continued to indicate an expansion in regional nonmanufacturing activity. Nearly 42 percent of the responding firms indicated increases in activity, while 17 percent reported decreases. The index for current general activity for the region also decreased 1 point to 32.2. Forty-three percent of the responding firms indicated increases in regional activity, while 11 percent reported decreases.

Growth in New Orders and Sales Slows

The new orders index decreased from 26.7 last month to 11.4 this month. While the percentage of firms that reported an increase in new orders (28 percent) continued to exceed the percentage that reported a decrease (17 percent), fewer firms reported increases this month compared with last month. The sales/revenues index fell 4 points to 25.5 in October.

Full-Time and Part-Time Employment Strengthens

The full-time employment index rose from 3.8 in September to 17.3 in October and now stands above its historical average of 14.2. This month, almost 28 percent of the firms reported an increase in full-time employment, and 10 percent reported a decrease. The part-time employment index rose 9 points to 14.7. Nearly 23 percent of the firms reported an increase in part-time employment this month. However, the average workweek index fell 13 points to 10.6. This month, the wage and benefit costs index rose 6 points to 40.1.

Firms Report Increases in Prices

Firms reported an increase in prices paid for inputs and for prices received for their own goods and services. The prices paid index rose 13 points to 28.3 in October (see Chart 2). More than 28 percent of the firms reported higher input prices, while almost none of the firms reported lower input prices. The prices received index increased 6 points to 14.3. Slightly more than 20 percent of the responding firms indicated increases in prices received, while 6 percent reported decreases. Both the prices paid and prices received indexes were above their historical averages of 20.1 and 11.7, respectively.


Prices Paid and Prices Received Indexes

Capital Expenditures Strengthen

Both indexes for capital spending rose. The index for equipment and software spending rose 15 points to 35.4, which erased the prior month’s decline. The share of firms reporting an increase in equipment and software spending was 41 percent, while the share reporting a decrease was 6 percent. The index for plant spending rose 6 points to 25.8.

Firms Are Optimistic About Future Growth

The respondents were generally optimistic about future activity over the next six months. Although the diffusion index for future activity at the firm level fell 11 points to 38.0, the share of firms that expect increases in activity over the next six months (56 percent) continued to exceed the share that expect decreases (18 percent) by a wide margin. The diffusion index for future activity at the regional level increased 2 points to 43.4 in October. The share of firms that expect an increase in regional activity was 51 percent in October, while the share that expect a decrease was only 8 percent. 

Summary

Respondents to this month’s Nonmanufacturing Business Outlook Survey reported that business activity continued to expand in the region’s nonmanufacturing sector. The index for current general activity at the firm level decreased for the second consecutive month but remained positive. Indicators for new orders and sales/revenues also fell, while the indicators for employment rose. Firms continued to express optimism for growth over the next six months.

Summary of Returns (October 2017)

Summary of Returns

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Questions?

Questions about the Nonmanufacturing Business Outlook Survey and its historical data can be addressed to Elif Sen. E-mail