The Federal Reserve Bank of Philadelphia’s Business Outlook Survey found that manufacturing conditions were softer in April after improving each of the previous four months. The composite index of general business conditions was lower-than-expected, falling from 12.5 in March to 8.5 in April.
Many of the measures of activity showed easing of growth rates from the past survey, including slower paces for new orders, shipments and the average workweek. The number of employees bucked that trend, with the index for employment up from 6.8 to 17.9, its highest level since May 2011. This suggests a faster pace of net job creation, a welcome sign for the region. Pricing pressures were also present, with a slight acceleration in the index for the price of raw materials.
The forward-looking indices continue to show a positive outlook six months from now. Only 13.2 percent of respondents have a negative view of future activity, with over half of them expecting increased new orders. Employment and capital spending is also expected to be higher for roughly one-third of manufacturers in the region.
In other news, the Conference Board reported that the Leading Economic Index increased 0.3 percent in March, slower than the 0.7 percent gain in February. Still, this was the sixth consecutive month of gains, suggesting continued modest growth in the economy.
The largest contributors to the March increase were favorable lending conditions, higher stock values and improved building permit activity. Manufacturing provided a modest drag for the month, with a shorter average workweek for production workers outweighing mixed reports on new orders. A drop in consumer confidence also weighed on the index.
Looking at the current environment, the Coincident Economic Index was up 0.2 percent, similar to last month. In this case, increased manufacturing and trade sales were the largest factor in the increase, adding 0.11 percent to the index. Higher nonfarm employment and personal income figures were also helpful, with flat industrial production numbers providing no contribution.
Chad Moutray is chief economist, National Association of Manufacturers.
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