The Richmond Federal Reserve Bank said that manufacturing activity in its District has contracted for two consecutive months. The composite index declined slightly from -6 in February to -7 in March, both of which represent a dramatic shift from the expansion noted in January (12). As such, respondents to the Richmond Fed survey did not observe the rebound from weather-related softness that was noted in similar surveys from the New York and Philadelphia Federal Reserve Banks.
Instead, growth continued to be lackluster, with new orders (unchanged at -9), shipments (down from -6 to -9), and capacity utilization (down from -7 to -14) all declining for the second straight month. Employment levels were flat. According to the Richmond Fed’s report, “A participant commented that weather has `wreaked havoc’ on demand for the past two months, but he anticipated that his company will be very busy once the weather improves.”
Indeed, manufacturers in the region remained mostly upbeat about the future despite the current weaknesses. The index for expected new orders six months from now improved from 15 in February to 30 in March, returning to where it was in January. Similar rises were seen in the forward-looking measures for shipments (up from 17 to 31), capacity utilization (up from 12 to 29), employment (up from 12 to 22), and capital expenditures (up from 9 to 18). The employment figure was notable because it suggested that the pace of hiring was now at its fastest pace since December 2010.
The prices paid for raw materials edged slightly lower for the month, down from 1.19 percent at the annual rate in February to 0.85 percent in March. Pricing pressures six months from now also eased, down from 2.25 percent to 1.81 percent.
Chad Moutray is the chief economist, National Association of Manufacturers.