NFPA Surveys as Leading Indicators

NFPA conducts two monthly surveys with its manufacturing members. The State of the Fluid Power (SOFP) survey asks members quick questions about the current state and future of the industry, while Confidential Shipment Statistics (CSS) tracks orders and shipments of fluid power components.  

One of the questions asked in the SOFP survey reads, “How will the next 12 months of shipments compare to the last 12 months of shipments”, with answer options as: 

• Above 

• The Same 

• Below 

This question is posed for pneumatics, mobile hydraulics, and industrial hydraulics specifically. It turns out, in NFPA’s CSS survey, we collect shipment values for those three categories as well. This posed the question: Does SOFP predict CSS? 

The SOFP question (how will the next 12 months of shipments compare to the last 12 months of shipments?) is essentially asking respondents to predict, directionally, the 12/12 rate of change. These answers are tallied and converted into a diffusion index resulting in a number from 0 to 100 (0 = 100% of responses were “below” while 100 = 100% of responses were “above”).  

What we have done below is plot the SOFP diffusion indexes for pneumatic, mobile hydraulic, and industrial hydraulic against the same CSS shipments indexes graphed with a 12/12 rate of change. Given the predictive nature of the SOFP index, we can shift the index forward to line up peaks and troughs, effectively creating a leading indicator.  

Pneumatic: 

Lining up peaks and troughs put the SOFP index 8 months ahead of the CSS 12/12 rate of change. Looking to the far right of the graph, the CSS shipments 12/12 briefly plateaued from 2022 into 2023, but have since plummeted, following the movement of the SOFP index.  The SOFP index appears to be predicting positive movement in the coming months for Pneumatic shipments.  

Note: SOFP index was shifted to revolve around 0 for this graph. 

Mobile Hydraulic: 

Like pneumatic, the mobile hydraulic SOFP index also shifted forward 8 months to line up peaks and troughs. Since mid-2022, the SOFP index has been on a clear downward trend but jumped back up in the most recent survey to more optimistic heights. The CSS shipments 12/12 ROC have decreased since the first half of 2023 at an almost linear rate. We will be watching to see if the CSS shipments follow the SOFP index’s movement in the coming months.  

Note: SOFP index was shifted to revolve around 0 for this graph. 

Industrial Hydraulic: 

The Industrial hydraulic SOFP index follows suit, being shifted forward 8 months to line up peaks and troughs. The SOFP index was on a clear downward trend but spiked upward in the most recent month. The CSS shipments 12/12 is on a straight decline, following the overall trend of the SOFP index. The Industrial Hydraulic SOFP index follows the same movement as the Pneumatic and Mobile Hydraulics’ SOFP index. Altogether, the SOFP indices indicate growth in the coming year.  

Note: SOFP index was shifted to revolve around 0 for this graph. 

For a second look at information seen in this article, please click this link: file:///T:/Market%20Information/1_NewOrganization/R%20Dashboards/CSS%20x%20SOFP/CSS—SOFP—Version-2.html. Correlation and series lag is calculated in the webpage linked, in addition to adjustable visuals.  

This data is available to participants in each respective survey. If you have questions or want more info on how to participate in these surveys, don’t hesitate to reach out.  

Questions? Contact Cecilia Bart at cbart@nfpa.com or 414-259-2027.