Survey of Tenth
District Manufacturers
by
Chad R. Wilkerson
Manufacturing activity in the Tenth Federal Reserve District
remained very strong in June. The year-over-year indexes for production
and shipments reached new record highs, and expectations for future
factory activity increased solidly. The year-over-year and future finished
goods price indexes were unchanged after falling slightly in May from
record highs in April, while the year-over-year and future raw materials
price indexes both edged down for the second month in a row. Nearly all of
the month-over-month indexes increased again in June, but the monthly data
are not seasonally adjusted, so caution must be taken in basing analyses
on month-to-month comparisons. Until several years of monthly data are
available for seasonal adjustment, this report will focus primarily on
changes in activity versus a year ago.
The net percentage of firms
reporting year-over-year increases in production jumped from 35 in May to
51 in June, the highest reading in the history of the survey (Tables 1
& 2). Activity at both durable- and nondurable-goods producing plants
rose strongly and, although sample sizes make it more difficult to draw
firm conclusions about individual states, the data available suggest that
production was well above year-ago levels in all district states.
Similar to the production index, most other year-over-year indexes
of factory activity were very high in June. Indeed, the shipments and
workweek indexes both rose to new survey highs. Moreover, the indexes for
new orders, backlog, and supplier delivery time were down only slightly
from the record highs reached in recent months. The employment and capital
spending indexes remained well above zero, and the inventories of finished
goods index was slightly positive for the second month in a row.
The year-over-year price indexes, although no longer at record
levels, remained quite elevated by historical standards. The finished
goods price index held steady at 34, down only slightly from the record
high of 37 reached in April. The raw materials price index fell slightly
for the second month in a row but still remained higher than before the
April surge in prices.
Plant managers’ expectations for factory
activity six months down the road rose solidly in June after easing
somewhat in May. The future production index rose from 36 to 48, and the
future new orders index jumped from 28 to 47. Both indexes are down only
slightly from the record highs reached in the fourth quarter of 2003. The
future shipments, backlog, and workweek indexes also rose in June. On a
less positive note, the future hiring and capital spending indexes both
eased slightly after falling by a larger amount in May. Even so, both
indexes remain well above zero. Readings for the six-month-ahead price
indexes were similar to those of the year-over-year price indexes. The
future finished goods price index was unchanged at 28 after peaking in
April, while the future raw materials price index eased for the second
month in a row.
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