New York Fed: Continued Solid Gains in Manufacturing Activity in March

Manufacturing activity in the New York Federal Reserve Bank’s district continued to show solid gains in manufacturing activity in March. In the latest Empire State Manufacturing Survey, the composite index of general business conditions rose from 13.1 in February to 22.5 in March. After decelerating for four straight months from the three-year high of 28.8 in October, it was encouraging to see the headline index rebound once again. Many of the key underlying data points were also higher in March, including faster expansions for new orders (up from 13.5 to 16.8), shipments (up from 12.5 to 27.0), the average workweek (up from 4.6 to 5.9) and inventories (up from 4.9 to 5.6).

Hiring (down from 10.9 to 9.4) slowed somewhat on net, but, interestingly, the percentage of respondents suggesting that employment for their firms had increased for the month improved, up from 18.9 percent in February to 25.8 percent in March. The easing in the index stemmed from a pickup in those suggesting that hiring was lower, up from 8.0 percent to 16.4 percent.

As we have seen in recent months, pricing pressures continued to increase. The prices paid index rose from 48.6 to 50.3, its highest level since March 2012. Indeed, more than half of those completing the survey said that their input costs were higher in March, with just 2.8 percent saying that they were lower. The forward-looking inflationary measure suggested that this trend should continue, with the expected prices paid index inching up from 52.1 to 55.9, its fastest pace since May 2012.

Despite the increased pricing pressure, manufacturers in the New York Fed’s district remained very upbeat about the next six months. The future-oriented composite index declined from 50.5 in February, its best reading since January 2011, to 44.1 in March—a number that still suggests a very robust outlook. The underlying data were mostly lower, but promising overall. This included new orders (down from 47.2 to 43.0), shipments (down from 46.7 to 43.3), employment (up from 19.5 to 23.3), the average workweek (down from 20.8 to 14.7), capital expenditures (down from 31.9 to 29.4) and technology spending (down from 23.6 to 18.9).

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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