Survey of Tenth District Manufacturing
by Chad R. Wilkerson
Manufacturing activity in the Tenth Federal Reserve District expanded solidly in June. The year-over-year production index edged higher, and expectations for future factory activity remained relatively strong. The year-over-year price indexes also edged higher after falling in May, while the six-month-ahead price indexes continued to ease. Most month-over-month indexes in the survey rose in June, 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 to 39 in June, up from 35 in May and from 32 in April (Tables 1 & 2). A sizable net percentage of both durable- and nondurable-goods-producing plants reported year-over-year production growth. While sample sizes make it more difficult to draw firm conclusions about individual states, the data available suggest that production was well above year-ago levels in all district states.
Most other year-over-year indexes of factory activity remained solid or rose slightly in June. The new orders index edged down from 46 to a still-high 44, while the shipments index rose from 39 to 50, its highest reading since last December. The employment and capital spending indexes also increased modestly, and the workweek index posted a more sizable gain. The inventory indexes were largely unchanged after falling fairly sharply in May.
The year-over-year price indexes remained high in June. The raw materials price index was virtually unchanged, edging up from 70 to 71. This index peaked at 86 in March. The finished goods price index also rose slightly in June, from 46 to 49. This level was below readings in the fifties during the first four months of the year but still quite high by historical standards.
Plant managers’ expectations for future factory activity were generally unchanged in June after falling somewhat in May. The six-month-ahead production index edged up from 31 to 32. While still relatively high, the readings on the future production index in May and June were the lowest readings of the past two years. The future capital spending index also edged higher, from 22 to 24, and was about in the middle of its range over the past year. The future shipments, new orders, and employment indexes all fell slightly. Similar to the production index, the future shipments and new orders indexes posted their lowest readings of the last two years but were still well above zero, at 29 and 28, respectively. The future price indexes both continued to fall, suggesting that manufacturing price pressures could ease somewhat by the end of the year. The future raw materials price index dropped from 48 to 41 and was down considerably from a recent peak of 63 in March. Also, the future finished goods price index fell from 31 to 25, down from an all-time high of 42 in February. Still, both future price indexes remain elevated by historical standards, and many firms plan to continue raising prices in the months ahead.
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