Last week, in discussing the manufacturing survey from the New York Federal Reserve Bank, I said that “the `improvement’ seen in these numbers is mostly that conditions did not worsen.” The same could be said for today’s report from the Richmond Federal Reserve Bank.
The composite index for the Richmond Fed’s manufacturing survey contracted five of the six months between May and October. In light of that, the zero reading for November seems positive in that manufacturing activity has stopped contracting, at least for now.
In fact, much of this report highlights conditions unchanged from October, with little change in shipments, employment and the average workweek. The index for new orders was -2 in November, an improvement from the -17 reading of September and -5 for October. Some modest upticks in supplier delivery time and wages were observed, however.
In terms of pricing pressures, respondents reported that raw material prices grew 3.42 percent on average at annual rates, which was higher than the 2.20 percent observed last month. Finished goods prices rose 2.64 percent for the month. This also was above last month’s average price increase of 1.75 percent. Manufacturers continue to see elevated pricing pressures over the next six months.
As we have seen in many of these regional sentiment surveys, manufacturers in the Richmond district are significantly more upbeat about future activity, with the composite index up from 28 in October to 36 in November. Respondents anticipate faster growth in new orders, shipments, capital expenditures and employment moving forward.
Chad Moutray is chief economist, National Association of Manufacturers.
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