Manufacturing Conditions SurveyJune 26, 2007 Manufacturing activity increases in June after six months of decline; Expectations less rosyManufacturing activity in the central Atlantic region rebounded sharply, according to the Richmond Fed’s June survey. The index of overall activity expanded for the first time in six months behind strong increases in new orders and shipments. Other indicators were mixed, however. Employment, backlogs, and capacity utilization contracted, though at a slower pace, while delivery times and inventories of raw materials increased.
Looking ahead, manufacturers’ optimism about their business prospects in the months ahead waned somewhat this month, with softer readings for new orders, shipments, and capacity utilization. In contrast, contacts expect wages to grow a bit quicker over the next six months.
On the price front, both raw material and finished good prices grew at a faster clip in June. In addition, respondents indicated that they expected price growth to move up a bit more quickly during the second half of 2007. Current ActivityIn June, the seasonally adjusted manufacturing index—our broadest measure of manufacturing activity—jumped fourteen points to 4 from May’s reading of -10. Among the index’s components, shipments gained fourteen points to 7, new orders jumped nineteen points to 6, and the jobs index advanced six points to finish at -3.
Other indicators varied. The orders backlog and capacity utilization indices did not quite escape negative territory, gaining thirteen and fourteen points, respectively, to read -5 and -3. Vendor delivery times increased, adding seven points to 6, while our gauge for inventories of finished goods was somewhat lower than in May, slipping two points to 19. The inventories of raw materials index, on the other hand, edged up three points to 15. 
EmploymentLabor market activity at District factories firmed somewhat in June. The employment index registered a -3 versus last month’s reading of -9, and the average workweek index moved up eight points to -1. The wage index trimmed two points to 9. 
ExpectationsIn the June survey, our contacts remained confident about their business prospects during the next six months, though the readings slipped from May levels. The index of expected shipments dropped nine points to 21, and the new orders indicator fell five points to end at 22. In addition, the orders backlog index lost ten points to 4, vendor delivery times inched down five points to a reading of 1, and capacity utilization declined seven points to 12. Furthermore, the planned capital expenditures index moved lower in June, down three points to 13.
District manufacturers’ hiring plans were mixed. The expected manufacturing employment index was little changed at 8, while the average workweek reading declined seven points to 8. In contrast, the expected wage index posted an eight point gain to 43. 
PricesDistrict manufacturers reported that raw material prices increased at an average annual rate of 3.29 percent during June—a sharp uptick from May’s reading of 2.62 percent. Finished good prices also posted a marked increase from May, rising at a 2.04 percent pace in June compared to 1.50 percent last month. Looking ahead to the second half of the year, respondents expected that the prices they pay will advance at a 3.81 percent pace, up from 3.10 percent in May. Additionally, contacts look for finished good prices to increase at a 1.82 percent annual rate during the next six months, compared to last month’s 1.27 percent pace Quelle: http://www.richmondfed.org/research/...facturing_conditions/index.cfm Servus, J.B.
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