The Philadelphia Federal Reserve says its business outlook survey hit 9.7.

Consensus was for a reading of 8.7, from a revised 6.4.

The current employment index increased 6 points, with 23% of firms reporting increases in employment in January, slightly higher than the 18% prior. But firms reported reduced work hours, with the average workweek index falling from 4.8 to -5.3.

As usual we remind you: Goldman Sachs chief economist Jan Hatzius says the survey is the best predictor of future economic growth.

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January 2014 Business Outlook Survey

Manufacturing growth in the region continued in January, according to firms responding to this month’s Business Outlook Survey. The survey’s broadest indicators for general activity, new orders, shipments, and employment were positive, signifying continued moderate growth. The survey’s indicators of future activity moderated but continue to suggest general optimism about growth over the next six months.

Indicators Suggest Continued Moderate Growth

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a revised reading of 6.4 in December to 9.4 this month (see Chart).* The index has now been positive for eight consecutive months.

The current shipments and new orders indexes remained positive but moved in opposite directions compared with December. The demand for manufactured goods, as measured by the current new orders index, decreased from a revised reading of 12.9 to 5.1 this month. Shipments continued to expand, and its index edged slightly higher to a reading of 12.1.

Labour market indicators showed some improvement this month. The current employment index increased 6 points from its revised reading in December. 20-three per cent of the firms reported increases in employment in January, which is slightly higher than the 18 per cent that reported increased employment last month. Firms reported reduced work hours, with the average workweek index falling from 4.8 to -5.3.

Cost pressures were slightly more widespread this month among reporting firms: The prices paid index increased 2 points, to 18.7. But with respect to firms’ own manufactured goods, price increases were less widespread this month: The prices received index decreased 6 points, to 5.1.

Six-Month Indicators Moderate

The survey’s future indicators have recently shown moderating optimism about growth in manufacturing. This month, the future general activity index fell 10 points, from a revised reading of 44.8 in December to 34.4 this month (see Chart). Still, nearly 48 per cent of the firms expect increases in activity over the next six months; 13 per cent of the firms indicated that they expect decreases. The indexes for future new orders and shipments also remained at relatively high levels but fell 7 points and 9 points, respectively. The future employment index was virtually unchanged at 17.5, with nearly 25 per cent of the firms expecting to increase employment over the next six months.

In this month’s special questions, firms were asked about the factors that are influencing their hiring plans over a longer horizon of 12 months (see Special Questions). The percentage of firms that indicated they expect employment growth over the next year (41 per cent) exceeded the percentage expecting decreased employment growth (10 per cent) by a significant margin. Nearly all firms responded to a question about the factors that were restraining hiring. The most frequently cited factors restraining hiring were the need to keep operating costs low and low expectations for sales growth. Expected slow sales growth was the most frequently cited “most important” factor restraining hiring. Difficulty finding workers with appropriate skills and uncertainty about the cost of health-care insurance also ranked high.


The January Business Outlook Survey suggests that activity in the region’s manufacturing sector increased moderately this month. Firms reported increases in overall activity, new orders, and employment in January. Price increases for firms’ own manufactured goods were less widespread this month. The survey’s future activity indexes suggest that firms expect growth over the first half of 2014.

Here are recent readings:

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