Survey of Tenth
District Manufacturing
by
Chad R. Wilkerson
The
manufacturing expansion in the Tenth Federal Reserve District slowed
somewhat in October, but expectations for future factory activity remained
strong. Though still high by historical standards, the year-over-year
indexes for production, shipments, and new orders all fell to their lowest
levels since the spring. Expectations for future factory activity,
however, remained as strong as in recent months. The year-over-year price
indexes both edged up to remain near historical highs, and firms generally
expect continued price pressures heading forward. The month-over-month
indexes were mixed compared with September, 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 in production fell to 41 in October, down from 48
in September and the lowest reading since May (Tables 1 & 2).
Year-over-year production growth fell slightly at both durable- and
nondurable-goods-producing plants. While sample sizes make it more
difficult to draw firm conclusions about individual states, it appears the
largest slowdowns in production growth occurred in Colorado and Nebraska.
Production remained well above year-ago levels in all district states.
Similar to production, most other year-over-year indexes of
factory activity experienced some falloff in October. The shipments index
fell from 51 to 42, the lowest reading since May, and the new orders index
fell from 50 to 42, the lowest reading since March. The employment index
eased slightly but was identical to the August reading, and the capital
spending index dropped but remained slightly higher than in August. The
supplier delivery time index also fell after reaching an all-time high in
September. The inventory indexes—for both raw materials and finished
goods—were largely unchanged and remained as high as at any time in the
past four years.
The year-over-year price indexes both edged up in
October and were near July’s record highs. The raw materials price index
rose from 72 to 77, marking the seventh consecutive month of a reading
above 70. The finished goods price index increased from 38 to 41, just
barely below July’s high of 42. Prices were up from a year ago for most
heavy steel- and petroleum-using plants, but also for a majority of other
types of plants as well.
Plant managers remained quite optimistic
about future factory activity. The six-month-ahead production index was
unchanged at 39 for the second month in a row, and the future shipments
and new orders indexes were similar to readings in the mid- to high-30s of
the previous three months. The future capital spending index was unchanged
at 25, while the future employment index edged up from 23 to 26 but was
down slightly from its August peak. The future raw materials price index
rose slightly, while the future finished goods price index was unchanged
after rising considerably in September, suggesting firms expect continued
price pressures for the foreseeable future.
|
