Richmond Fed: Manufacturing Composite Index at a New All-Time High in November

The Richmond Federal Reserve Bank said that manufacturing activity in its district expanded at its fastest monthly rate in November since the survey was introduced in late 1993.

The composite index for the general business assessment improved from 12 in October, its lowest point since January, to 30 in November, a new all-time high. The jump in confidence in the latest report included strong gains for new orders (up from 17 to 35), shipments (up from 9 to 33), capacity utilization (up from 7 to 19), employment (up from 10 to 18) and the average workweek (up from 8 to 17). As such, this release has shown healthy economic conditions for the sector in the district, with demand and output trending in the right direction. To illustrate this, the headline index has averaged 15.3 year-to-date in 2017, well above the average of 1.1 seen during the same 11-month time period in 2016.

In addition, manufacturing respondents in the Richmond Fed’s region were very optimistic in their outlook for the next six months, even with some easing in some of the key data points in this survey. Forward-looking measures for new orders (down from 45 to 38), shipments (down from 50 to 40), capacity utilization (down from 40 to 31) and employment (down from 25 to 24) remained quite robust despite some softening in responses. At the same time, capital expenditures (up from 27 to 32) and wages (up from 33 to 39) accelerated in November, illustrating a willingness by manufacturers to make new investments in their businesses and highlighting an expectation for a tight labor market.

Meanwhile, manufacturers in the district have seen input prices pick up recently but still anticipate modest inflationary pressures overall moving forward. Those completing the survey said that prices paid for raw materials increased slightly from 1.77 percent at the annual rate in October to 2.04 percent in November, its highest rate since April. Nonetheless, raw material prices are expected to grow 1.78 percent at the annual rate six months from now. This was down from 1.95 percent in the October survey.

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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