Manufacturing activity expanded strongly in January, according to the Richmond Federal Reserve Bank, continuing a trend seen since November. In fact, the average composite index over the past three months was 12.7, a nice improvement from the stalled levels of manufacturing growth in the district observed in both September and October.
Despite the better news, the underlying subcomponents were mixed, with a slower pace of growth for some measures. On the positive side, new orders (up from 10 to 14), capacity utilization (up from 8 to 11), and the average workweek (up from 6 to 8) were all higher. In contrast, shipments (down from 15 to 14) and the number of employees (down from 14 to 6). Nonetheless, each of these figures suggest continued expansion overall.
Along those lines, manufacturers in the Richmond Fed district remain mostly upbeat about the next six months — a finding consistent with other regional surveys. Respondents were generally optimistic about sales, shipments, utilization, and capital spending for the first half of 2014. Hiring was also expected to grow, but less robustly than the other figures.
In terms of pricing pressures, manufacturers continue to experience the benefits of decelerated raw material costs. The average price paid for inputs was down for 1.97 percent at the annual rate in November to 1.53 percent in December to 1.32 percent in January. Those taking the survey anticipate inflation to pick up only modestly, increasing to 1.64 percent by mid-year, according to the survey. That represents a decrease from the 2.05 percent expected last month.
Chad Moutray is the chief economist, National Association of Manufacturers.