The Kansas City Federal Reserve Bank said that manufacturing activity picked up in March, expanding for the third straight month. The composite index of general business activity rose from 4 in February to 10 in March. This was the highest point since February 2012. The largest increase was in the production index, which increased from 3 to 22. Indeed, the percentage of survey respondents who said that their output had declined in the month fell from 28 percent in February to 11 percent in March. This improvement was likely the result of better weather, which caused a number of delays in production in the previous report.
In terms of other indicators, there was also notable progress for new orders (up from 5 to 13), shipments (up from 10 to 16), and exports (up from -1 to 6). As with the production index above, the shifts were largely due to fewer people saying that there were decreases. For instance, 39 percent of those taking the survey said that their new orders had increased in the month (up from 35 percent last month); whereas, 14 percent noted decreased sales (down from 24 percent).
Hiring was one area where weaknesses remain. The index for the number of employees declined has declined from 11 in January to 3 in February to zero in March. Two-thirds of respondents said that their employment levels were unchanged, with the other answers nearly split equally. Moreover, looking ahead six months, employment growth was also only barely positive on net, unlike in several other regional surveys.
Fortunately, other forward-looking measures are more upbeat. Nearly half of those taking the survey anticipate increased production, shipments, and new orders over the next six months. Roughly one-quarter of survey participants said that they plan to increase capital spending, with 15 percent anticipating declines. One other finding that was surprisingly soft was export growth, with just 11 percent of Kansas City Fed manufacturers saying that they expect increased international sales. Hopefully, this figure improves in coming months.
Chad Moutray is the chief economist, National Association of Manufacturers.
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