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Factory Activity Continued to Decline

Tenth District manufacturing activity continued to decline in July, and expectations for future activity stayed mostly flat (Chart 1, Tables 1 & 2). District firms’ prices paid for raw materials increased on a monthly and yearly basis, while prices received for finished products declined moderately month-over-month. Heading forward, firms expect input prices to increase at a faster pace, and finished product prices to increase at a slower pace.

The month-over-month composite index was -11 in July, up from -12 in June and down from -1 in May (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The pace of decline eased slightly for durable goods, while it stayed steady for nondurable goods. All month-over-month indexes remained negative, expect for the number of employees and prices paid for raw materials. The production index decreased moderately, and the volume of shipments, volume of new orders, and backlog of orders indexes all fell significantly. Year-over-year factory indexes were mixed. The composite index increased to -4 in July from -12 in June. However, year-over-year production and volume of shipments turned positive while capital expenditures grew further. The future composite index remained at -2 in July, as firms expect further declines in production and orders along with increases in employment.

Manufacturing Composite Indexes

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A time series chart from July 2018 to July 2023 showing the manufacturing composite diffusion index of activity versus a month ago and versus a year ago. The month-over-month composite index was -11 in July, up from -12 in June and down from -1 in May. The year-over-year composite index increased from -12 to -4 in July.
Date Vs. a Month Ago Vs. a Year Ago
Jul-22 13 46
Aug-22 5 36
Sep-22 4 30
Oct-22 -2 24
Nov-22 -2 19
Dec-22 -4 15
Jan-23 -1 4
Feb-23 0 5
Mar-23 0 6
Apr-23 -10 -2
May-23 -1 6
Jun-23 -12 -12
Jul-23 -11 -4

Special Questions

This month contacts were asked special questions about profit margins. A majority of firms reported that profit margins decreased significantly (11%) or decreased slightly (45%) since the beginning of the year, while 17% of firms reported no change in profit margins, 23% reported a slight increase, and 4% reported a significant increase. (Chart 2). Firms were also asked how supply chain issues have changed from a year ago. About a quarter (26%) of contacts reported they were much better, while nearly half (49%) said they were slightly better. 10% of contacts reported no change, 10% reported they were slightly worse, 2% reported they were much worse, and 3% of contacts have not experienced supply chain issues over the last year (Chart 3).

Selected Manufacturing Comments

“Generally things are better, but in our segment inflation is not tamed. Still challenging, but more on an individual item basis. Pricing pressures to customers still exist, again, not at critical levels - but generally not great either. Customers expect things to either not climb or even come down price wise which just isn't obtainable. We did not raise prices as much as input costs went up, so we are still working at recapturing margins.”

“Overall, deliveries of new and larger aircraft in our industry have created increased demand for labor services and price competition has decreased significantly.”

“Most of our customers are slowing down and are unsure about potential orders past the current day. Uncertainty is the key word for our business.”

“Last 60 days have seen a dramatic decrease (50%) in our weekly bookings.”

“Material prices have declined rapidly, and delivery times have improved.”

“Industrial orders are slowing, in some areas, quite significantly.”

Survey Data

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Excel SpreadsheetHistorical Monthly Data

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