The Federal Reserve Bank of Richmond reported that manufacturers in its region were more optimistic about the current business environment. The composite general business index rose to 20 in February, up from 3 in December and 12 in January.
Improvements were seen across-the-board in a number of production indicators. For instance, the index for new orders rose from 14 to 21 for the month, with similar increases seen for shipments, capacity utilization, the number of employees and the average workweek. Wages and raw material inventories continued to expand, but at a slower rate than reported in January.
Looking at pricing trends, respondents said that the prices paid for raw materials rose at an annual rate of 2.25 percent, down from their 2.53 percent gain cited in January but above the 1.55 stated in December. With that said, manufacturers expect modest inflation in the months ahead, with the expected increases for raw materials averaging 1.58 percent, at the annual rate, over the next six months. This would suggest some easing from prior months.
Manufacturing activity in the coming months is also expected to be strong. While some of the measures declined slightly from January, they continue to show an upbeat mood. Higher levels of shipments, new orders, employment and capital expenditures are anticipated over the next six months. Overall, these figures show a region which has rebounded nicely from the weaknesses that it experienced in mid-2011.
Meanwhile, the Conference Board reported that consumers are also more positive about their current economic situation. Their Consumer Confidence Index rose from 61.5 in January to 70.8 in February. This is a sizable improvement from the 45.2 registered in August. This was the highest level since last February.
Americans, in general, are more positive about both the present and future economy, with the indices for both up. As this measure often turns on pocketbook issues, the respondents cited improvements in the labor market as one of the reasons. Still, nearly 39 percent of those taking the survey said that jobs were “hard to get” (although this is down from almost 50 percent who said the same thing just five months ago).
Consumer intentions for future purchases were mixed. There were a slightly higher percentage of individuals saying the planned to purchase new autos, but a modest decline for those suggesting a home or appliance purchase.
Chad Moutray is chief economist, National Association of Manufacturers.