Richmond Fed: Manufacturing Growth at Fastest Rate in Nearly Seven Years

The Richmond Federal Reserve Bank said that manufacturing activity in its district expanded at its fastest rate since April 2010. The composite index of general business activity increased from 17 in February to 22 in March. That was the fifth straight monthly expansion in the mid-Atlantic region. Indeed, new orders (up from 24 to 26), shipments (up from 16 to 17), capacity utilization (up from 15 to 21), employment (up from 10 to 20) and the average workweek (up from 16 to 21) each accelerated somewhat in the latest survey. Growth in demand also grew at its briskest pace in nearly seven years, which should bode well for activity moving forward, particularly if it can be sustained.

Indeed, manufacturing respondents were very optimistic about the next six months, even with some easing from the prior survey. A number of key indicators regarding the economic outlook in the region for the sector remained strong, including new orders (down from 53 to 48), shipments (down from 53 to 44), capacity utilization (down from 46 to 38), employment (up from 23 to 25), the average workweek (up from 11 to 15) and capital expenditures (down from 27 to 17). The March reading for expected new orders represented a slight pullback from February’s index figure, which was the highest point in the survey’s 23-year history.

Meanwhile, inflationary pressures decelerated somewhat in March after moving higher in February (and over the course of the past few months). Manufacturers in the district said that prices paid for raw materials have decreased from 2.09 percent at the annual rate in February to 1.69 percent in March. Note that this pace was 0.73 percent in March 2016. Raw material prices are expected to grow 1.60 percent at the annual rate six months from now. This was down from 1.85 percent in February, but up from 1.02 one year ago.

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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