The Federal Reserve Bank of Dallas said that manufacturing activity weakened somewhat in August, with many of its key measures reporting slower growth than in July. For instance, the index for new orders decreased from 10.8 in July to 5.4 in August. Just over half of all respondents said that their sales had not changed in the month, with 26.5 percent noting increases. A similar decline can be seen with production, capacity utilization, and shipments.
In contrast to these figures, general perceptions about the current macroeconomy and one’s own company outlook increased marginally for the month. The composite index of general business activity rose from 4.4 to 5.0, and the company outlook index was up from 4.5 to 7.3. Almost 65 percent of those taking the survey said that their outlook had not changed versus the previous month, with 21.2 percent suggesting that it had improved. This suggests that manufacturers were more positive than negative about the present economic environment, but not overwhelmingly so.
The good news is that manufacturers continue to invest in their future. There were increases in the indices for employment (up from 9.3 to 11.2) and capital expenditures (up from 3.5 to 10.4). Nonetheless, roughly three-quarters of respondents had not changed their hiring or investing in August, and the index for hours worked actually declined for the month (down from 1.3 to -9.9).
Looking ahead, manufacturers in the Dallas Fed region continued to be mostly upbeat about the next six months. The index for expected new orders increased from 30.8 to 35.8, with almost 39 percent of survey takers saying that they anticipate higher sales in the months ahead. Approximately 6 in 10 responses predict no change.
While the data tend to support a pickup in activity in the second half of 2013, there were also several of them which decelerated between July and December, much like the indices for the current environment. For instance, the production measure decreased from 42.0 to 36.0, and the employment index dropped from 25.3 to 11.5. Still, even with these declines, business leaders remain cautiously optimistic, with 41.7 percent anticipating increased shipments and over one-quarter planning more hiring.
Chad Moutray is the chief economist, National Association of Manufacturers.
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