The following is an unedited transcript of the news release from the Federal Reserve Bank of Philadelphia.


February 2008

Activity in the region’s manufacturing sector continued to weaken this month, according to firms surveyed for the February Business Outlook Survey. After falling significantly last month, indexes for general activity, shipments, and new orders remained negative. Despite reporting a weakness in activity, firms continued to report a rise in prices for inputs and their own manufactured goods. Manufacturers’ outlook for the next six months turned noticeably more pessimistic this month.

Indexes Suggest Continued Weakness

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, fell from -20.9 in January to -24.0 this month. Forty percent of the firms reported no change in activity from January, but the percentage of firms reporting decreases (42 percent) was substantially greater than the percentage reporting increases (18 percent).

Other broad indicators also suggested continued declines this month. Demand for manufactured goods, as represented by the survey’s new orders index, remained negative, although the index increased from -15.2 to -10.9. The current shipments index, however, fell 10 points, from -2.3 to -12.2. Indexes for both unfilled orders and delivery times remained negative. Overall weakness was still evident in replies about employment and hours worked, although the indexes were higher than last month’s low readings.

The current employment index increased from -1.5 to 2.5, and the percentage of firms reporting an increase in employment (22 percent) was slightly greater than the percentage reporting a decrease (20 percent). Weakness was still evident in average hours worked: 18 percent reported declines; 14 percent reported increases. The average workweek index was less negative this month, at -3.9, compared with -16.1 in January.

Firms Report Higher Prices

A sizable share of the firms continued to report higher prices, both for inputs and their own products. Fifty-three percent of manufacturers reported higher input prices this month, although the prices paid index edged slightly lower, from 49.8 in January to 46.6. Price increases for the manufacturers’ own products remained relatively widespread. Thirty-one percent of the firms reported increased prices for their own goods this month. The prices received index, however, declined from its 39-month high of 32.0 in January to 24.3.

Six-Month Outlook Deteriorates

The outlook for manufacturing growth over the next six months deteriorated further this month. The future general activity index declined from 5.2 in January to -16.9, its first negative reading since January 2001 and the lowest reading since 1990. The index has declined 57 points over the past four months. The percentage of firms expecting declines in activity over the next six months (39 percent) now exceeds the percentage expecting increases (22 percent). The index for future new orders dropped 17 points and moved into negative territory, while the future shipments index fell eight points but remained positive.

This month, the future employment index declined notably. For the first time since 2001, the index fell below zero, declining from 18.8 to -8.8. The percentage of firms expecting declines in employment (31 percent) exceeded the percentage expecting increases (22 percent).


Available at:

http://www.philadelphiafed.org/files/bos/bos0208.pdf