Factory Activity was Mostly Flat
Tenth District manufacturing activity was mostly flat, and expectations for future activity moderated slightly (Chart 1, Tables 1 & 2). Monthly survey price indexes saw minimal growth in January. Price indexes remained above year-ago levels for most firms, and many firms expected some slowing in price gains over the next six months.
The month-over-month composite index was -1 in January, up slightly from -4 in December and -2 in November (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Factory growth was driven more by activity at durable goods plants in January, especially wood product, machinery, and transportation equipment manufacturing. Month-over-month indexes remained mostly negative, but the pace of decline slowed compared to December. While employment and material inventory indexes were positive in January, and the new orders, backlog, and new orders for exports indexes continued to decline. Year-over-year factory indexes decreased further in January, and the composite index slowed from 15 to 4. The future composite index decreased from 6 to 3 in January with the new orders for exports and finished goods inventories indexes moving into negative territory this month.
|Date||Vs. a Month Ago||Vs. a Year Ago|
This month contacts were asked special questions about demand for products, expectations for capital expenditures, impact of increases in long-term interest rates, and labor. In January, 52% of firms expected demand for their products to be higher in 2023 compared to last year, while 19% of firms expected no change in demand for their products, and 29% of firms expected demand for their products to be lower in 2023 compared to last year (Chart 2). About 38% of firms expected capital expenditures to be higher in 2023 compared to last year, while 30% of firms expected no change in in capital expenditures, and 32% of firms expected capital expenditures in 2023 to be lower compared to last year (Chart 3).
Selected Manufacturing Comments
“Have seen significant increase in backlog and in the process of hiring additional sales personnel.”
“Cost of goods (production inputs) remain extremely high and still going north. This idea that inflation is easing is not true - at least in our industry/segment. Profits taking hit despite price increases. Can't pass through all cost increases to customers - resulting in reduced margins on our side.”
“Supply chain has improved, prices for materials are falling fast and delivery times are much better.”
“Our energy costs continue to accelerate at a double-digit pace. We continue to experience a shortage of truck drivers and double-digit inflation in truck driver wages. Driver turnover remains a problem as competitors seek to entice them to work for them with higher pay.”
“Our industry saw a surge in demand during Covid. Customers appear to have over ordered and are working through inventory. We expect 2023 to be similar in demand to pre-Covid times. Our workforce has shrunk over the past 12 months significantly. Basically, we just didn't replace workers who quit or were terminated for various policy violations.”
“Overall demand is weaker for our products. With high prices for capital projects, we are delaying all the projects we can.”