Results of the monthly Carolinas Survey of Business Activity show that a greater share of responding firms said that current business activity increased in January, and a greater share was also more optimistic about the near term economic outlook than had been the case in December. The current general business conditions index built on its solid December result, as did the current sales metric. At the same time, the expected general business conditions index increased for the third month in a row, reaching its highest point in nearly six years while the expected sales measure reached its highest point in almost seven years.
In spite of the solid improvement in current and expected business activity measures, the current labor demand metrics changed little over the month. The current number of workers index moved higher, but remained well below the levels seen in the middle part of last year, and the current average weekly hours metric fell into negative territory. In contrast to the current measures, both corresponding expectations indicators moved higher and were above the lofty levels seen last year. Skills availability was still constrained in January.
On balance, responding firms were more upbeat about current and expected business spending than they had been in December. With the exception of a slight decline in the business services category, current business spending metrics increased in January. Moreover, each of the three corresponding expectations indexes moved higher.
Survey responses indicated that the average increase in current prices paid accelerated modestly in January, as did the average increase in current prices received. The corresponding pricing expectations averages moved up as well, but remained low by recent historical standards.
The results of our monthly survey of the Carolinas suggest that business activity may have expanded further in January. The current general business conditions index came in at 18 this month, a four-point increase from December. Meanwhile, the current sales measure moved up to 10 in January from 8 a month earlier. With regards to respondents' expectations, the expected general business conditions index was 51 this month and the expected sales index increased to 60, its highest reading since January 2010.
On balance, survey results suggested that current labor demand improved slightly in January, and expectations for demand six months from now increased. The current number of workers index increased to 5 this month from 1 in December. While this is a move in the right direction, the metric remains well below the average readings of mid-2016. The current average workweek measure fell into negative territory. The expected number of workers index jumped to its highest level since May 2010. However, firms may have difficulty finding workers as the availability of skills indexes continued to suggest that firms were facing persistent worker shortages. The current wage indicator eased a bit, but remained firmly in positive territory, while the expected wages index jumped to a new series high.
Measures of current business spending were mixed, but mostly up in January. The current total capital expenditures index increased to 24 this month, a 10-point increase from the prior month, and the current equipment/software indicator moved up to 20 from 15 in December. The current business services spending metric lost one point over the month, settling in at 8.
Each of the three corresponding business spending expectations indexes increased in January. The expected total capital expenditures and expected equipment/software measures both increased by eight points this month, to 38 and 32, respectively. The expected business services metric increased as well to 21, a six-point improvement compared to December.
The average increase in current prices paid moved up to 1.45 percent in January from 1.25 percent in December, while the average increase in current prices received increased to 1.09 percent from 0.69 percent. At the same time, the expected prices paid average jumped to 1.72 percent from 1.40 percent, and the expected prices received average moved up to 1.49 percent from 1.34 percent in December.