The Federal Reserve Bank of Dallas said that manufacturing activity picked up in March, rebounding from the easing experienced in February. The index for a company’s own outlook increased from 3.4 in February to 9.1 in March, with the percentage of respondents saying that their outlook improved for the month rising from 17.2 percent to 22.6 percent. In general, manufacturers were somewhat more optimistic in March, and looking at a longer-run trend, businesses have reported expanding levels of activity for 11 straight months.
The underlying data tend to support the acceleration in activity for the month. For instance, the index for new orders rose from 9.5 to 14.7. Just over 31 percent of those taking the survey said that their sales were higher in March, with 16.7 percent reporting declines. Other indicators also reflected stronger growth, including production (up from 10.8 to 17.1), capacity utilization (up from 9.1 to 13.1), shipments (up from 13.3 to 19.5), employment (up from 9.9 to 15.0), and capital expenditures (up from 7.0 to 14.1).
Some of these data points were at levels not seen in a while. This was a sign that some of the weather-related weaknesses that were pervasive in the February report have started to dissipate. For example, the hiring data were at their fastest pace since June 2012, with almost one-quarter of respondents saying that they added workers in this survey. At the same time, the production index was at its highest point in 9 months, with the shipment measure at a four-year peak.
Looking ahead six months, Texas manufacturers remain positive about future levels of activity. For example, over half of the respondents anticipate higher sales over the coming months. Similar findings can be noted for production, capacity utilization, shipments, employment, and capital spending over the next six months. The sample comments mostly tend to support this rather upbeat assessment, with some respondents citing regulatory, pricing pressure, workforce, and foreign competition concerns. As such, it is clear that manufacturers are cautiously optimistic about activity moving forward, even as some anxieties persist.
Chad Moutray is the chief economist, National Association of Manufacturers.
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