The Federal Reserve Bank of Philadelphia said that manufacturing activity accelerated once again in February, continuing to expand at healthy rates in the first two months of 2018. The composite index of general business activity rose from 22.2 in January to 25.8 in February. To illustrate just how much this measure has reflected strong growth of late, the composite index averaged a rather robust 26.5 over the past 15 months. (It averaged just 1.1 in the 15 months prior to that.) In February, the data were mixed. New orders (up from 10.1 to 24.5) and hiring (up from 16.8 to 25.2) both improved, but shipments (down from 30.3 to 15.5) and the average workweek (down from 16.7 to 13.7) slowed, even as all of these indices indicated solid gains in February.
If there are any concerns in the data, it is in the pricing figures. The index for prices paid increased from 32.9 to 45.0, its highest level since May 2011. Moreover, two-thirds of manufacturing firms predicts higher input costs over the next six months, with that index rising from 54.2 to 65.2, a pace not seen in seven years. This mirrors an acceleration in other pricing data. In addition, respondents to this survey said that they see wages and benefits rising by 3.0 percent over the next year in a series of special questions, with consumer prices up 2.5 percent.
Meanwhile, manufacturers in the Philadelphia Fed district continued to be very upbeat in their outlook. The forward-looking composite index was drifted slightly lower, down from 42.2 to 41.2, but growth expectations remained vigorous overall. More than 60 percent of those completing the survey see new orders and shipments rising in the next six months, and at least 44 percent anticipate additional hiring and capital spending.