Survey of Tenth District Manufacturing
by Chad R. Wilkerson
Manufacturing activity in the Tenth Federal Reserve District continued to grow solidly in July. The year-over-year production index eased slightly from June’s record level but was still very high by historical standards, and the future production index also remained elevated. Meanwhile, the year-over-year finished goods price index rose to a new high and the raw materials prices index matched its previous high. The future price indexes also edged higher but were down from April peaks. Nearly all month-over-month indexes were positive, 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 from a record high of 51 in June to 46 in July (Tables 1 & 2). The slight easing in the index was due to a moderate slowdown in year-over-year growth at nondurable-goods producing plants, as production growth among durable goods producers was similar to June’s strong reading. Although sample sizes make it more difficult to draw firm conclusions about individual states, the data available suggest that production was above year-ago levels throughout the district.
Most other year-over-year indexes of factory activity also remained very high in July. Indeed, the shipments, backlog, and supplier delivery time indexes all rose to new highs, and the new orders index also improved modestly. On the other hand, the employment and capital spending indexes both fell somewhat after edging higher in June. The raw materials inventories index was positive for the sixth survey in a row, while the finished goods inventory index edged back below zero.
The year-over-year price indexes both rose to record levels in July after easing slightly in May and June. The raw materials price index matched its previous high of 82 reached in April. The finished goods price index rose to a record 42, surpassing its previous peak, in April, of 37. It appears the turnaround in the price indexes was due to a rebound in steel prices, as steel-using firms accounted for virtually all of the increase in both indexes in July.
Plant managers’ expectations for future factory activity remained quite high. The six-month-ahead production index fell from 48 in June to 40 in July but was up from a reading of 36 in May. Similarly, the future new orders index fell from 47 to 36 but was also still higher than in May. The future employment index was little changed. The future capital spending index dropped from 23 to 18, likely due to the ending of accelerated depreciation incentives in December. The future price indexes both turned back upward, again due largely to changes in expectations at steel-using firms, but were still below their April peaks.
|
