Manufacturing firms responding to the August Business Outlook Survey indicated that regional manufacturing activity expanded this month. The survey's broadest indicators for general activity and new orders were positive for the third consecutive month, although they fell back from higher readings last month. Responses indicated flat shipments and only slight increases in overall employment this month. The survey's indicators of future activity, although not as high as in July, continue to suggest that firms expect continued growth over the next six months.

Indicators Suggest Continued Growth The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from 19.8 (its highest reading since March 2011) to 9.3 this month. The index has now been positive for three consecutive months. The percentage of firms reporting increased activity this month (28 percent) was greater than the percentage reporting decreased activity (19 percent). Other current indicators suggest growth moderated this month. The demand for manufactured goods as measured by the current new orders index remained positive for the third consecutive month but fell 5 points to 5.3. The shipments index fell 15 points to just below zero, its first negative reading in three months. Both unfilled orders and delivery times indexes were negative this month, suggesting continued slack conditions. Labor market indicators showed only modest improvement this month. The current employment index, at 3.5, fell 4 points but has been slightly positive for two consecutive months. The percentage of firms reporting increases in employment (19 percent) exceeded the percentage reporting decreases (16 percent). Price Indexes Suggest Moderate Pressures The index for prices paid decreased, suggesting that price pressures are slightly less widespread compared with July. The prices paid index edged 4 points lower. Twenty-four percent of the firms reported higher prices for inputs this month, compared with 29 percent last month. Firms reported a rise in prices for their own manufactured goods: More firms reported price increases (17 percent) than reported decreases (8 percent), although 71 percent reported no change in prices. The prices received index increased 3 points. Six-Month Indicators Still Optimistic The survey's future indicators suggest continued optimism among the reporting manufacturers, although future indicators fell back from higher readings in July. The future activity index decreased 6 points from its reading in July but still remains well above its average readings over the past year. Nearly 53 percent of firms are expecting increases in activity over the next six months. The future new orders and shipments indexes also fell back this month, decreasing 19 points and 11 points, respectively. The future employment index also weakened, falling 14 points. Nearly 29 percent of firms expect increases in employment over the next six months. In special questions this month, firms were asked about the importance of seasonal factors in production and the scheduling of summer production declines. About 36 percent of firms indicated that they scheduled shutdowns or slowdowns during July this year, nearly the same that indicated shutdowns in July last year (35 percent).

For July, the largest percentage of firms (23 percent) indicated that production decreases were about the same as in past years. The number of firms reporting that the July production decreases were greater than usual (8 percent) edged out the number indicating that decreases were less than usual (3 percent). However, far fewer (11 percent) scheduled production decreases in August, and this was notably less than the reported shutdowns in August 2012 (26 percent).