Survey of Tenth District Manufacturing
by Chad R. Wilkerson
Manufacturing activity in the Tenth Federal Reserve District continued to expand in August. The year-over-year production index was near a record high, and expectations for future factory activity remained very strong. In addition, future hiring plans improved. The year-over-year price indexes, though still high by historical standards, eased slightly, and expectations for future price increases also moderated somewhat. Most month-over-month indexes continued to rise, 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 rose from 46 in July to 50 in August, only slightly below June’s record high of 51 (Tables 1 & 2). The slight increase in August was due to a modest improvement at nondurable-goods-producing firms. Durable goods production also remained well above year-ago levels. 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 improved or remained at high levels in August. The shipments index rose to a new survey high, the new orders index matched its previous high, and the employment index increased moderately after easing for the first time in six months in July. Both of the inventory indexes rose markedly. Indeed, the index for inventories of raw materials rose to its highest level in six years, and the index for inventories of finished goods was solidly positive after dipping below zero in July. The capital expenditures index was virtually unchanged, while the indexes for backlog of orders and supplier delivery times both fell somewhat after rising to record levels in July.
The year-over-year price indexes both fell somewhat in August after rising to new highs in July. The raw materials price index fell from 82 to 73 but was still higher than in June. Similarly, the finished goods price index eased from 42 to 37 but remained higher than June’s reading.
Plant managers’ expectations for future factory activity remained very strong. The six-month-ahead production index edged down to 39 from 40 in July, but the future indexes for shipments, new orders, and capital spending all rose slightly. In a further sign of confidence on the part of manufacturers, the future employment index jumped from 15 to 30. The future price indexes both fell after rising somewhat in July. The future raw materials price index edged down slightly but remained very high at 55. Meanwhile, the future finished goods price index dropped to 20, the lowest reading since January.
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