Richmond Fed: Manufacturing Activity Rebounded in March

The Richmond Federal Reserve Bank reported rebounding manufacturing activity in March, much like was reported in similar surveys from its regional peers in New York and Philadelphia. The composite index of general business activity jumped from -4 in February to 22 in March, its highest monthly gain in nearly six years. After contracting in February, new orders (up from -6 to 24), shipments (up from -11 to 27) and capacity utilization (up from -5 to 17) each expanded strongly in March. Hiring (up from 9 to 11) and the average workweek (up from 5 to 16) also improved for the month. As such, this report was reassuring, offering a sign that manufacturing in the district was beginning to stabilize after months of weakness due to global headwinds.

This optimism carried through to the forward-looking measures, as well. Manufacturers in the region expect healthy increases on net for new orders (up from 31 to 45), shipments (up from 31 to 37), capacity utilization (up from 17 to 26) and employment (unchanged at 19) over the next six months. Capital spending (down from 25 to 15) is also predicted to increase modestly, albeit will a slight pullback from sentiment seen in the prior report.

Meanwhile, inflationary pressures remained quite minimal. Manufacturers in the Richmond Fed region said that prices paid for raw materials grew 0.60 percent at the annual rate in March, up from 0.16 percent growth in February but continuing to be very low. Moving forward, raw material prices are expected to continue to remain muted, down from 1.18 percent at the annual rate six months from now in the last report to 0.95 percent this time.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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