Business Outlook Survey
March 2006
Activity in the region’s manufacturing sector continues
to grow in March, according to firms surveyed for this
month’s Business Outlook Survey. Although
the general activity index decreased slightly this month,
indicators for new orders and shipments showed improvement.
Firms continued to report higher prices for inputs and
their own manufactured goods, although the survey’s
price indicators continued to moderate. The region’s
manufacturing executives remain generally optimistic about
growth in business at their firms over the next six months,
although future indicators suggest less optimism than last
month.
Manufacturing Expansion Continues
The survey’s broadest measure
of manufacturing conditions, the diffusion index of current
activity, decreased from 15.4 in February to 12.3 this
month. Twenty-two percent of the firms reported increases
in activity; 10 percent reported decreases. Other broad
indicators rose moderately, however. The new orders index
increased eight points this month, and the shipments index
increased two points. Firms, on balance, reported higher
unfilled orders and longer delivery times again this month,
although these two indexes were lower than in last month.
Continued expansion in manufacturing is evident in replies to questions about
employment and hours worked. However, the percentage of firms reporting increased
employment (17 percent) was somewhat lower than in February (24 percent). The
current employment index fell six points this month. On balance, the workweek
continued to increase: More firms reported a longer workweek (17 percent) than
reported a shorter one (11 percent).
Price Pressures Continue to Moderate
Firms reported
higher production costs again, although price pressures moderated for the fifth
consecutive month. Twenty-three percent of the firms reported higher input
prices, but this was down from 36 percent in February and 53 percent in January.
The prices paid index fell 13 points and has dropped 50 points over the past
five months (see Chart).
Higher prices for final manufactured goods were reported
by 19 percent of the firms, slightly lower than the 24 percent that reported
them last month. The prices received index, at 15.4, was down three points
from February and has fallen steadily for five consecutive months (see Chart).
Six-Month Forecasts Are
Less Optimistic
Expectations for future manufacturing growth deteriorated somewhat this month;
however, expectations for new orders, shipments, and employment remain favorable.
The future general activity index fell 17 points, but the new orders index
fell only six points and the shipments index fell five points. The future employment
index decreased three points, but a larger percentage of firms expect to increase
payrolls over the next six months (31 percent) than expect to decrease them
(12 percent).
In special questions this month firms were asked about their experiences
filling recent job openings (see Special Questions). Fifty-one percent of
the firms indicated that they had recently experienced problems filling job
openings because applicants lacked sufficient skills. This is higher than
in 2004, when 42 percent of the firms with job openings reported problems
filling positions. The most frequently cited skills that applicants lacked
were the use of production machines; specific plant operator skills; and
basic skills in reading, writing, and math. Respondents were asked about
whether the gap between required skills and available skills has changed
over time. Nearly 16 percent of the firms indicated that the gap was greater
than it was six months ago, and 19 percent said that it was greater than
a year ago.
Summary
Indicators of current activity all point to continued
growth of the region’s manufacturing sector this month: Indexes for general
activity, new orders, shipments, and employment all remained positive. Price
pressures remain but continue to show a moderating trend. Firms expect continued
improvement of manufacturing business over the next six months, even though
expectations were not as strong as in February.
Special Questions (March 2006)
1. Has your firm experienced problems filling job openings in the past three months because
applicants did not have sufficient qualifications? |
|
March
2006
|
April
2004 |
|
|
|
| Yes |
51.4% |
42.0% |
|
|
| No |
37.2% |
36.1% |
|
|
| Have had no openings |
11.4% |
21.9% |
|
|
| Total |
100.0% |
100.0% |
|
|
|
| |
| If yes, what are the three most significant skill categories that applicants are lacking? |
| |
Percent choosing specific skill category* |
|
|
| |
March
2006 |
April
2004 |
|
| Skills in the use of production machines or tools |
92.6% |
76.4% |
|
| Specific plant and system operator skills |
66.6% |
50.9% |
|
| Basic skills (reading, writing, math) |
55.6% |
40.0% |
|
| Supervisory, management, or admin. skills |
51.9% |
23.6% |
|
| English language skills |
18.5% |
14.5% |
|
| Computer Skills |
22.2% |
9.1% |
|
| |
|
|
|
| *The totals sum to more than 100% because each participant could choose three categories. |
|
|
2. In general, how has the gap between required skills and available skills changed over the following periods? |
| |
|
|
Now compared to six months ago |
Now compared to last year |
|
|
Larger |
|
|
15.9% |
19.4% |
|
Smaller |
|
|
6.3% |
11.3% |
|
Same |
|
|
77.8% |
69.3% |
|
Total |
|
|
100.0% |
100.0% |
|
|
Summary of Results Table | Chart
Business Outlook Survey Historical Charts (New)
Release, tables, and chart (PDF, 198 KB)
Text version
Return to Main Business Outlook Survey Page
Requests for information or comments about the Business Outlook Survey can be sent to: mike.trebing@phil.frb.org
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