The Federal Reserve Bank of Philadelphia reported that manufacturing sentiment was higher in March than in February. The index for business activity rose from 10.2 to 12.5, the fourth consecutive monthly gain.
Despite the growth in overall economic confidence, several indicators show an easing of growth this month. For instance, the index for new orders dropped from 11.7 to 3.3. Similar drop-offs were seen among shipments and the average workweek. On the bright side, inventories and the number of workers accelerated.
In contrast with other news out today, the pace of growth for the cost of raw materials slowed after jumping significantly last month. Still, raw material costs remain elevated and are expected to continue to grow.
Manufacturers in the Philly region remain very positive, with growth in measures for future new orders, shipments, employment and capital spending. Some of these indicators eased in March, but each remains strong in terms of expectations.
Nonetheless, in a series of special questions, fewer manufacturers anticipate higher production in the second quarter of 2012 than from the same time last year. The average expected growth for the Q2 in 2012 is expected to be 1.4 percent, versus the 2.7 percent anticipated last year. Note that production slowed in mid-2011, which was not anticipated, due to a number of factors.
In regard to this year’s growth, nearly 58 percent of respondents said that this was an acceleration in production due largely to improved business conditions. So, while the 2012 figure was lower than the one for 2011, the trend represents an improvement in activity.
Chad Moutray is chief economist, National Association of Manufacturers.