Survey of Tenth
District Manufacturers
by
Chad R. Wilkerson
Manufacturing activity in the Tenth Federal Reserve District
expanded further in March. The year-over-year production and employment
indexes edged higher, and the capital expenditures index rose solidly.
While the year-over-year new orders index fell moderately, expectations
for future factory activity also remained very strong. Also, the raw
materials price index continued to rise, and more firms than in recent
surveys were able to pass some of their recent cost increases through to
finished goods prices. The month-over-month production index rose
considerably in March, 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 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 rose to 31 in March, up modestly from 27 in February and 24 in
January (Tables 1 & 2). Production improved at both durable- and
nondurable-goods-producing plants in March, with both types of plants
experiencing solid year-over-year gains. While sample sizes make it more
difficult to draw firm conclusions about individual states, the data
available also suggest that production was above year-ago levels in all
district states.
Like the production index, most other important
year-over-year indexes of factory activity improved in March. The
employment index edged up to 14 after posting its first double-digit
reading in nearly six years in February, and the capital expenditures
index doubled from 9 to 18. The indexes for shipments and export orders
also rose slightly. In addition, the supplier delivery time index jumped
to 20, its highest level in the nine-year history of the survey, as rising
global demand for manufactured goods and short supply of some materials
combined to cause delays. On the negative side, the new orders index
slipped from 38 to 29 to post its lowest reading since last August. Prior
to last August, however, the last time the new orders index was higher
than 29 was in early 1998. The inventory indexes were mixed. The raw
materials inventories index rose slightly, while the finished goods
inventory index turned negative again to continue its up-and-down pattern
of the past five months.
Price indexes for both raw materials and
finished goods rose in March. After steadying somewhat in January and
February, the year-over-year raw materials price index jumped from 50 to
64 in March, the highest reading since early 1995. The finished goods
price index also increased moderately, rising from 11 in February to 19 in
March, as more firms than in previous surveys were able to pass some of
their recent cost increases through to customers.
Despite a
moderate dip in the year-over-year new orders index, expectations for
future factory activity in the district remained quite strong in March.
The future production and new orders indexes each edged down slightly—--to
40 and 36, respectively—--but remained high by historical standards. The
future capital spending index was basically unchanged at 22, while the
future employment index rose from 13 to 19. Concerns about material prices
and availability persisted, as the future raw materials price index rose
from 48 to 55 and the future supplier delivery time index increased from 5
to 14. The future finished goods price index was virtually unchanged at
24. The relatively high value of this index suggests a sizable number of
firms expect to be able to pass some, although by no means all, of their
recent cost increases through to customers.
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