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The positives in the Philadelphia Fed’s Business Outlook Survey

Phalguni Soni

Impact of the Fed taper: The Treasury International Capital report (Part 7 of 8)

(Continued from Part 6)

The Business Outlook Survey was issued by the Philadelphia Fed on Thursday, February 20.

What is the Business Outlook Survey?

The Business Outlook Survey is a monthly survey of manufacturers conducted by the Federal Reserve Bank of Philadelphia. Survey participants indicate the direction of change in overall business activity and in the various measures of activity at their plants: employment, working hours, new and unfilled orders, shipments, inventories, delivery times, prices paid, and prices received. Primarily a manufacturing survey, it precedes the index of industrial production by nearly three weeks, and so, is known as a leading manufacturing indicator.

What did February’s survey results indicate?

The survey’s broadest indicators for general activity, new orders, shipments, and employment decreased to -6.3 in February from 9.4 in January, the survey’s lowest reading in nine months. Survey respondents reported lower overall business activity with new orders, shipments, and average work hours declining in February.

The report’s positives included increasing employment and firms expecting production to rise modestly during the first quarter. The survey’s future activity indexes indicate that firms expect continued growth over the next six months with over half of the reporting firms indicating that production would accelerate in 1Q 2014 compared to 4Q 2013.

Other survey results included lower inflation pressures on the purchasing side for participants with the prices paid index decreasing 5 points to 14.2. However, firms reported more widespread price increases with respect to their own products as the prices received index increased 3 points to 7.6.

Labor market indicators indicated mixed results in February with the current employment index remaining positive for the eighth consecutive month but declining 5 points from January’s reading. A total of 21% of the firms reported increases in employment in February, slightly lower than December’s 23%.

Continue to Part 8

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