Manufacturing Conditions Survey
March 27, 2007
Manufacturing contraction persisted in March; Expectations edged lower
Manufacturing activity in the central Atlantic region continued to drift lower in March, according to the Richmond Fed’s latest survey. The pace of decline in factory shipments and employment moderated, while declines in new orders and backlogs were more pronounced. Capacity utilization expanded on pace, and delivery times continued to edge higher. In addition, manufacturers reported slightly quicker growth in finished goods inventories.
Looking ahead, manufacturers’ optimism about their business prospects edged lower in March. Firms anticipated that their shipments, new orders, employment, and capacity utilization would grow a bit less rapidly in the months ahead.
Both raw materials and finished goods grew at a more measured rate in March. Looking ahead, respondents expected raw materials prices to grow more slowly, although they expected finished goods to rise roughly on pace with February’s reading.
Current Activity
In March, the seasonally adjusted manufacturing index—our broadest measure of manufacturing activity—held steady at -10. Among the index’s components, shipments gained five points to -10, new orders pulled back seven points to -11, and the jobs index moved up four points to finish at -9.
Other indicators generally changed little. The capacity utilization index was virtually unchanged at -17, while vendor delivery times edged higher to 5. Inventory levels for finished goods grew at a slightly quicker pace in March when compared to February. The finished goods inventories index added two points to 28, while the raw materials inventories index eased one point to 18. The orders backlogs indicator showed the largest change, falling nine points to
-13.
Employment
Labor market conditions changed little at District plants in March. The employment index registered a -9 versus February’s reading of -13, and the average workweek edged up two points to -18. The wage index advanced at a slightly quicker pace, picking up two points to 4.
Expectations
In the March survey, our contacts remained generally confident, though a little less so about their business prospects for the coming six months. The index of expected shipments inched down four points to 26, and the new orders indicator nudged down one point to end at 31. The orders backlog index lost four points to 13; the vendor delivery times fell five points to 6; and capacity utilization declined five points to 12. Planned capital expenditures dropped four points to 15.
Hiring plans in March were slightly less optimistic as well. The expected manufacturing employment index declined four points to 15, and the average workweek slipped two points to finish at 11. In addition, the expected wage index registered a five-point loss to 37.
Prices
In March, District manufacturers reported that raw materials prices increased at an average annual rate of 2.44 percent—considerably lower than February’s reading of 3.52. Finished goods prices rose at a 1.24 percent pace compared to February’s reading of 1.58 percent. Looking ahead to the next six months, respondents expected the prices they pay will advance at a 2.36 percent pace compared to February’s reading of 2.85 percent. In addition, contacts looked for finished goods prices to advance at a 1.81 percent annual rate—a touch above last month’s 1.78 percent pace.
Servus, J.B.
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"I believe that the first test of a truly great man is his humility." (John Ruskin)
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