Two reports released today highlight the precariousness of our current economic environment. Even as there are some glimmers of hope in some statistics, we still see signs of weakness.
While manufacturing activity has been stronger elsewhere, the Mid-Atlantic region has struggled of late. The Federal Reserve Bank of Richmond reports that manufacturers in its region continued to contract in October, with its composite index remaining at -6. This marks the fourth straight month (or the fifth out of the past six months) that this number has been negative. Measures for new orders, shipments, capacity utilization and employment were all contracting.
Employment growth, in particular, moved from +7 to -7 for the month – the first time that the job picture has been negative in the past year for the region. Nonetheless, the average workweek edged from -7 to -1, suggesting that it has slowed its rate of decrease to be nearly unchanged.
In terms of the next six months, the picture remains brighter. Respondents provided nearly identical expectations from September, with strong growth anticipated in shipments, new orders and capacity utilization. The number of employees and capital expenditure plans both improved, with more manufacturers in the Richmond region planning to do both this month versus last month.
In terms of prices paid, those taking the survey said that raw material prices rose 2.2 percent in October (at the annual rate), with finished prices up 1.75 percent. Looking ahead, costs are expected to increase by 3.41 percent, which remains elevated but below the 4.45 percent rises projected last month.
Meanwhile, consumer sentiment remains dismal. The Conference Board released its latest Consumer Confidence Index, which fell from 46.4 in September to 39.8 in October. This was the first time that the index has been below 40 since March 2009, when we were in a recession.
This decline was largely on pocket-book issues. The percentage of respondents saying that jobs were plentiful decreased to 3.4 from 5.6 last month. Likewise, those expecting their income to decrease rose to 19.2 from 17.8. As a result, the indices for present and expected conditions both declined. Clearly, the public remain anxious, particularly about the current environment.
In terms of spending, fewer Americans had plans to buy homes in October, down from 4.7 to 3.9; however, there was a greater expectation for purchasing appliances (from 40.8 to 45.9). Auto spending was virtually unchanged.
Chad Moutray is chief economist, National Association of Manufacturers.
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