Business Outlook Survey November 2006 Economic conditions in the region’s manufacturing sector improved slightly in November, according to firms polled for this month’s Business Outlook Survey. Indicators for general activity and shipments increased modestly from their readings in October, but indicators for new orders and employment weakened. 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 were slightly less optimistic about future activity, with most future indicators moderating from their readings in October. Indicators Suggests Growth The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -0.7 in October to 5.1 this month. The general activity index was slightly below zero the preceding two months, following 14 consecutive months of positive readings (see Chart 1). Thirty percent of the firms reported increased activity this month, while 25 percent reported decreased activity. The new orders and shipments indexes provide mixed signals of growth this month. The new orders index fell 17 points, to -3.7, erasing the 15-point gain in the previous month. The shipments index remained positive and edged 1 point higher than October. Delivery times lengthened this month: the delivery time diffusion index increased 15 points to its first positive reading in three months. The unfilled orders index remained negative, but increased 7 points. Evidence of weakness in manufacturing growth is suggested by replies concerning employment and hours worked this month. The percentage of firms reporting increased employment was matched by the percentage of firms reporting decreased employment ( 21 percent) and the current employment index fell nine points from its October reading. The average workweek index remained close to zero, with the percentage of firms reporting increased hours the same as the percentage reporting decreased hours (22 percent). Price Pressures Moderate Again Respondents reported higher costs for inputs again this month, but increases were not as widespread as in previous surveys. The prices paid index fell 5 points this month. The index has fallen four consecutive months and it now at its lowest reading in eight months (see Chart 2) . Thirty-six percent of the firms reported higher input prices; 9 percent reported lower input prices. Seventeen percent of firms reported higher prices for final manufactured good, down slightly from 22 percent last month. Eleven percent of the firms reported lower prices this month and the prices received index edged down 12 points to its lowest reading in 15 months (see Chart 2). Forecast Remains Moderate Expectations for future manufacturing growth moderated slightly this month, following a 17-point increase last month. Indicators for future activity, new orders, and shipments, remained positive but decreased from their readings in October. The future general activity index decreased from 16.7 to 12.4 (see Chart 1). Paralleling the decline in the future general activity index, the index for future new orders and shipments decreased 12 points and 11 points respectively. The future employment index was virtually unchanged from October. Firms’ expectations for future capital spending showed a notable improvement, the diffusion index for capital expenditures increased 12 points to its highest reading in eight months. Summary Conditions in the region’s manufacturing sector improved slightly this month. Indicators for general activity and shipments suggests modest growth this month, although indicators for new orders and employment weakened. Input price pressures are continuing to moderate and fewer firms reported increases for finished manufactured goods this month. Indicators for the next six months suggest that firms are slightly less optimistic about future conditions this month than in October. ________________________________________________________________________________ Business Outlook Survey Summary of Returns November 2006 November vs. October Six Months from now vs. November Prev. Prev. Diff. Inc. No ch. Dec. Diff. Diff. Inc. No ch. Dec. Diff. Index Index Index Index General Busines -0.7 29.9 45.3 24.8 5.1 16.7 35.4 35.0 23.0 12.4 Conditions New Orders 13.4 29.5 37.3 33.2 -3.7 29.2 35.5 42.6 18.5 17.1 Shipments 5.3 31.4 43.4 24.9 6.5 34.4 42.4 34.7 18.9 23.5 Unfilled Orders -11.1 18.6 58.3 22.6 -3.9 0.7 18.5 56.7 18.8 -0.3 Delivery Times -9.4 18.9 68.1 13.0 5.9 1.4 15.3 62.8 15.5 -0.1 Inventories 13.2 27.6 49.2 23.2 4.4 -8.8 28.7 38.5 29.1 -0.4 Prices Paid 32.0 35.7 54.2 9.0 26.7 33.8 42.1 41.3 8.8 33.4 Prices Received 17.8 16.5 72.7 10.8 5.7 23.5 27.8 54.5 12.0 15.7 Number of Emp. 9.4 21.2 57.9 20.9 0.2 13.1 24.7 54.8 11.5 13.2 Avg. Emp. Wrkwk -2.0 22.3 52.3 21.9 0.4 7.9 17.4 62.5 11.0 6.4 Capital Ex. -- -- -- -- -- 8.0 33.1 35.2 13.2 19.9 Notes: (1) Items may not add to 100 percent because of omission by respondents. (2) All data are seasonally adjusted. (3) Diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease. (4) Survey results reflect data received through November 14, 2006.