Manufacturing activity remained weak in the latest Richmond Federal Reserve Bank monthly survey. The composite index edged up from zero in September to 1 in October, with both figures below the 14 that was registered in August. Fiscal uncertainties and the government shutdown were not helpful to manufacturers in the District, with the budgetary impasse zapping overall confidence and activity levels. With that said, the region’s manufacturers have had softness all year, with an average composite index for the first 10 months of -1.
In October, data were generally lower across-the-board. The pace of new orders came to a halt, with the sales index down from 16 in August to 5 in September to zero in October. At the same time, shipments, capacity utilization, and the average workweek were all contractionary. The one good sign was hiring. The employment index (up from -6 to 4) returned to being positive, albeit only barely so.
Moving forward, manufacturers in the Richmond Fed’s District remained mostly upbeat, but with slightly less gusto than the month before. The index for new orders six months from now declined from 35 to 23. Nonetheless, it still remains strong, and firms continue to be cautiously optimistic about future activity. This observation extends to shipments, utilization, capital spending, and even hiring. The average workweek, however, is anticipated to grow only modestly.
The prices paid for raw materials increased 2.27 percent at the annual rate in October, down from 2.44 in September. Looking ahead six months, respondents predicted input price growth of 2.08 percent, down from 2.26 percent last month. This is just above the 2 percent goal set by the Federal Reserve Board, but for the most part, it indicates that manufacturers expect modest inflation ahead which continues to be only marginally higher than the acceptable range.
Chad Moutray is the chief economist, National Association of Manufacturers.