The Richmond Federal Reserve Bank reported that manufacturers in its district have become more positive in June. The composite index of general business assessment rose from -2 in May to 8 in June, indicating that manufacturing has become to grow modestly in the region after contracting in 3 of the first 5 months of 2013. The shift occurred mostly through a pickup in new orders, with the sales index shifting from -10 to 9 for the month. Shipments and the average workweek were also experiencing moderate gains in June, which was a positive sign.
The Richmond survey mirrors similar ones from the Dallas and Philadelphia Federal Reserve Banks, with all of them noting a move from declines in manufacturing activity to modest growth on net. Like those reports, net hiring improved, but at a more measured pace. The employment index increased from -3 to 4. In the expectations measures, net hiring is anticipated to grow, but only modestly. The forward-looking employment index was unchanged at 6.
Beyond hiring, manufacturers in the Richmond Fed district remain cautiously optimistic about the second half of 2013. New orders and shipments are expected to increase strongly over the coming six months, even as the forward-looking sales index edged down slightly for the month. The good news is that pace of employment is also predicted to pick up, with its index up from 4 to 13. Capital investment is also forecast to grow modestly.
In terms of pricing pressures, respondents noted a very small acceleration in inflation in the last month, but it essentially brought it back to the levels seen in April. The prices paid for inputs increased 1.24 percent at the annual rate in June, up from 1.00 percent in May but down from the 1.27 percent seen in April. Manufacturers expect prices to grow over the coming months, with those taking the survey anticipating 2.06 percent price growth on average six months from now. This is up just slightly from the 1.91 percent response last month.
Chad Moutray is the chief economist, National Association of Manufacturers.