Carolinas Survey of Business Activity

March 2, 2017

Business Sentiment Improved in February; Respondents More Optimistic About the Outlook

Overview

General business conditions improved a little further in February, according to the results from the latest Carolinas Survey of Business Activity, and respondents remained optimistic about activity moving forward. The current general business conditions index built on the solid increase experienced in January and now stands at its highest level in nearly a year. Moreover, the current sales metric also increased modestly in February. Meanwhile, respondents were also very bullish in February about general business activity and sales six months from now, as both expectations measures nearly matched January's lofty readings.

Accompanying the seeming pick-up in business activity was a general increase in current labor demand. The current number of workers index was mostly unchanged in February but the current average weekly hours indicator jumped. The current availability of skills metric was negative again, suggesting that employers continued to struggle to fill open positions, and the current wages index increased. Expectations for labor demand six months from now remained solid, while expectations for wage increases were up sharply so far in 2017.

The measures reflecting current business spending were mixed in February, although the overall environment was largely unchanged. Meanwhile, each of the three corresponding business spending expectations metrics was down slightly from the prior month, yet each was firmly entrenched in solid positive territory.

Survey responses indicated that the average increases in current prices paid and received decelerated slightly in February, after accelerating modestly the prior month. The average expected increase in prices received also declined, but the comparable prices paid metric jumped this month.

General Business Assessments

Results from February's Carolinas Survey of Business Activity suggest that the region's economy continued to expand in 2017 and respondents expect much of the same over the coming six months. The current general business conditions index increased two points in February to 20, its highest reading since April 2016. The current sales metric jumped to 22, its highest since last April. The two corresponding expectations measures were virtually unchanged in February, at 52 and 59, respectively, both of which are among the highest in the series' history.

Labor Market Conditions

Labor demand remained firm in February while supply was still constrained, and this combination appeared to place further upward pressure on wages. The current number of workers index increased by just one point this month, to 6, but the current average weekly hours indicator swung from a −2 to 16, its highest reading in more than a year. Meanwhile the current availability of skills metric remained at −4 and the current wage measure increased to 20 in February from 14 a month earlier.

The measures of expectations for labor market conditions were largely unchanged. The expected number of workers index dipped, but the expected average weekly hours measure increased. The expected availability of skills indicator slipped and the expected wages number remained near the highest readings in the series' history.

Business Spending

Directional changes in the measures of current business spending were mixed, although each of the three metrics remained firmly in expansionary territory. The current business services spending index increased to 15 in February from 8 a month earlier. By contrast, the current equipment/software spending metric dipped down to 17 from 20 while the current total capital expenditures index came in at 23, a one-point decline from January's reading.

Expectations for business spending six months from now didn't appear to change much in February as each of the three measures (business services spending, total capital expenditures, and spending on equipment and/or software) edged down from January's readings, but remained in solid positive territory.

Prices

The average increase in current prices paid decreased slightly in February to 1.44 percent from 1.45 percent in January. The average increase in current prices received fell to 1.01 percent from 1.09 percent at the same time. With regards to future pricing conditions, the expected average increase in prices received moved lower during the month (to 1.41 percent from 1.49 percent) but the expected increase in prices paid jumped to more than 2 percent in February and was among the highest readings of the past two years.

Index Table

Survey Participation, Report, and Data Questions

Jeannette Plamp
Associate Regional Economist
(804) 697-8152