NFPA Surveys as Leading Indicators

NFPA conducts two monthly surveys with its manufacturer 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 puts the SOFP index 8 months ahead of the CSS 12/12 rate of change. Looking to the far right of the graph, the SOFP index is predicting a clear downward trend in the coming months. The CSS shipments 12/12 was on a clear decline in early 2022 but has since leveled out. It will be interesting to see if the CSS 12/12 shifts downward soon, as the SOFP index predicts.

Mobile Hydraulic:
Like pneumatic, the mobile hydraulic SOFP index is 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 leveled out in mid-2022 to early 2023 but has since turned toward decline again in recent months.

Industrial Hydraulic:

The Industrial hydraulic SOFP index follows suit being shifted forward 8 months to line up peaks and troughs. The SOFP index is 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 spike in the SOFP index is likely volatility as the CSS 12/12 does not show sign of leveling out soon.

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, please reach out to Sam Diedrich at sdiedrich@nfpa.com.