The Federal Reserve Bank of Dallas reported that manufacturing production was mostly unchanged in March, with the production index down from 11.2 in February to 11.1 in March. Nearly 60 percent of respondents said that there was no change in production for the month. Nonetheless, on a number of levels, this release suggests some easing of activity and overall sentiment in March.
Manufacturers’ assessment of their own company outlook as well as their take on the macroeconomy eased somewhat but continued to expand overall. The general business activity index, for instance, dropped from 17.8 to 10.8.
The rate of growth for other measures also declined. Both new orders and the growth rate of new orders slipped into negative territory. The new orders index decreased from 5.8 to -0.3. Mostly this suggests flat growth, so it is not something to get too worked up about – unless the trend continues. This is especially the case given the strong production figure.
Likewise, employment continues to grow soundly, with the index currently at 21.7, down from 25.2 last month. Capital expenditures also continued to expand, albeit slower than in February.
Manufacturers continue to be upbeat about future activity. Only 4.9 percent of respondents, for instance, anticipate a decrease in production over the next six months, with the forward-looking production index now at 44.0, up from 40.8 last month. Other indicators also show fast growth ahead, including new orders, shipments, employment and capital expenditures. Manufacturers’ company outlooks are also brighter.
Meanwhile, the Chicago Federal Reserve Bank released its National Activity Index for February, which also suggested a relatively flat month. The index fell from 0.33 in January to -0.09 in February, with slower manufacturing activity being one of the larger factors in the decline. If the index is zero, it suggests that the U.S. economy is growing at its historical trend; therefore, the February reading implies that the economy slipped to barely below its potential for the month. Industrial production was unchanged in February, and manufacturing production was lower than in the prior month.
Other factors were mixed. Improvements in employment helped to lift the measure, while housing starts and consumption led it lower. The three-month moving average is currently 0.30, indicating an economy that remains above-trend overall. This figure has edged higher each of the past four months.
Chad Moutray is chief economist, National Association of Manufacturers.
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