The Richmond Federal Reserve Bank said that manufacturing activity picked up strongly in November, rebounding from stalling out in September and October. The composite index increased significantly from 0 in September and 1 in October to 13 in November. That brought the measure closer to the 14 observed in August. In general, the Richmond data have mirrored other regional surveys, with an improvement seen more recently after softness earlier in the year. With that said, fiscal uncertainties and the government shutdown were not helpful to manufacturers in the District.
In November, the data were higher across-the-board. For instance, the index of new orders increased from 0 in October to 15 in November, with similar findings for shipments (up from -2 to 16) and the average workweek (up from -1 to 12). Hiring was up only modestly (up from 4 to 6), but that was still better than the net decline in September. Still, capacity utilization did not change, albeit with progress from the month before (up from -5 to 0).
Moving forward, manufacturers in the Richmond Fed’s region remained mostly upbeat, with some gains in sentiment in November. The index of expected new orders six months from now rose from 23 in October to 33 in November, suggesting cautious optimism for stronger future sales. Similar progress is anticipated for forthcoming shipments (up from 30 to 37) and capacity utilization (up from 18 to 20). Moreover, firms expect to continue investing in their businesses in light of improvements in activity, with hiring and capital spending picking up from the current pace.
The prices paid for raw materials increased 1.97 percent at the annual rate in November, down from 2.44 percent in September and 2.27 percent in October. This indicates a continuing deceleration in pricing pressures. The forward-looking expectations for inflation were also lower, down from 2.26 percent in September to 2.08 percent in October to 1.75 percent in November.
Chad Moutray is the chief economist, National Association of Manufacturers.