Survey of Tenth District Manufacturing
Tenth District manufacturing activity declined somewhat in March, and firms’ expectations for future factory activity weakened but still called for modest overall expansion in coming months. Price pressures intensified, due to higher raw materials and transportation costs, and producers indicated more price pass-through than in recent months.
The net percentage of firms reporting month-over-month increases in production in March was -5, unchanged from February and down from 7 in January (Tables 1 & 2, Chart). Production remained especially weak among non-durable goods producers. Like production, the majority of other month-over-month indexes were negative or sluggish. The shipments index was unchanged at -5, while the new orders index declined from 6 to -8, its lowest level in over six years. The order backlog index dropped lower, and the employment index fell to -10, a five-year low. In contrast, the new export orders index recorded its highest level in over six years, with many firms citing strong overseas demand due to the weak dollar. Both inventory indexes remained largely unchanged and close to zero.
The majority of year-over-year indexes also declined in March. The production and shipments indexes fell to their lowest levels in five years –zero– after rising slightly last month. The new orders index dropped from 13 to -9, and the order backlog index also continued to decrease. The employment index edged down for the second straight month, and the employee workweek was cut back further. However, the capital expenditure index still remained generally solid, and the new export orders index climbed higher. Both inventory indexes fell slightly from the previous survey.
After posting solid readings last month, most future factory activity indexes weakened in March, but remained above zero. The future production index declined from 26 to 6 and the future shipments index fell from 30 to 11, each index’s lowest level in over six years. The future new orders, order backlog, and employment indexes all dropped for the second straight month. The future capital expenditures index decreased after rising last month, and the future employee workweek was expected to fall to an all-time survey low. In contrast, the future new export orders index climbed higher, reaching its highest level in survey history. The future raw materials inventory index dropped from 5 to -6, while the future finished good inventory index declined only slightly.
All price indexes rose further in March, with notable increases in finished goods indexes. The month-over-month raw materials price index increased from 58 to 64, an all-time high, and the finished goods price index jumped to its highest level in four years. The year-over-year finished goods price index rose from 53 to 60, and the raw materials price index remained unchanged. The future finished goods price index increased for the fourth straight month to an all-time survey high, and the future raw materials index edged up from 73 to 74, also a historical peak. Several producers cited high commodity prices – particularly steel, oil, and wheat-based products – and increasing freight costs. Contacts also noted the greater need for and increased use of price pass-through, particularly for transportation costs.
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