Survey of Tenth
District Manufacturing
by
Chad R. Wilkerson
The
manufacturing expansion in the Tenth Federal Reserve District continued at
a solid pace in November, and expectations for future factory activity
remained strong. The year-over-year indexes for production, shipments, and
new orders rose slightly after easing in October, and the employment index
edged up to a nine-year high. Price pressures also persisted, as the
year-over-year indexes for both raw materials prices and finished goods
prices remained near historical highs, and more firms than in recent
surveys expect to be able to pass cost increases through to customers.
Most month-over-month indexes increased in November, but the monthly data
are not seasonally adjusted, so caution must be taken in basing analyses
on month-to-month comparisons.
The net percentage of firms
reporting year-over-year increases rose to 44 in November after falling to
41 in October (Tables 1 & 2). The slight improvement came at
nondurable-goods-producing plants, as the year-over-year production index
for durable-goods-producing plants fell slightly for the second month in a
row. While sample sizes make it more difficult to draw firm conclusions
about individual states, the data available suggest that production
remained well above year-ago levels in all district states.
Similar to the production indexes, many other year-over-year
indexes of factory activity rebounded after easing somewhat in October.
The shipments index rose from 42 to 47 and the new orders index edged up
from 42 to 44. The employment index rose from 25 to 28, the highest
reading of that index since 1995. The capital spending, backlog, and
export indexes also edged higher. By contrast, the workweek index and
supplier delivery time indexes both eased slightly. The inventory indexes
were mixed. The raw materials inventory index eased slightly, while the
index for inventories of finished goods rose modestly.
The
year-over-year price indexes remained very similar to their high readings
of the previous three months. The raw materials price index, at 74, was
within 3 points of its readings in August, September, and October and down
only moderately from its record of 82 reached in both April and July of
this year. Likewise, the finished goods price index, at 40, was within
three percentage points of its readings from the past three months, as
well as its record high of 42 set in July.
Plant managers
continued to be quite optimistic about future factory activity. The
six-month-ahead production index, at 38, was high by historical standards
and virtually unchanged from its readings of the previous four months.
Moreover, the future new orders index increased moderately, to 44, its
highest reading since June. The future employment index also remained
above 20 for the fourth month in a row, and the future capital spending
index was very similar to its solid readings of recent months. The future
price indexes suggested a possible increase in pricing power heading
forward, as the gap between the raw materials price index and the finished
goods price index narrowed somewhat. The future raw materials price index
was unchanged at 59, while the future finished goods price index rose from
30 to 36, the second-highest reading on record.
|
