Philly Fed: Manufacturers Continue to Report Healthy Expansion in March

The Federal Reserve Bank of Philadelphia said that manufacturing activity continued to be healthy in its district in March. The composite index of general business activity eased somewhat from 25.8 in February to 22.3 in March, but new orders (up from 24.5 to 35.7) and shipments (up from 15.5 to 32.4) accelerated strongly at their fastest paces in 12 months. More importantly, just over 52 percent of respondents said that new orders had increased in March, with just 16.4 percent noting declines. In addition, the labor market remained tight, with employment (up from 25.2 to 25.6) strengthening slightly and nearly 35 percent of those completing the survey suggesting that hiring had picked up in March. The average workweek (down from 13.7 to 12.8) slowed a bit in this report but was strong overall.

If there are any concerns in the data, it is in the pricing figures, as noted in last month’s survey. The index for prices paid pulled back somewhat from 45.0 in February, its highest level since May 2011, to 42.6 in March but remained highly elevated. Moreover, 64.0 percent of manufacturing firms predict higher input costs over the next six months, with that index easing from 65.2, a pace not seen in seven years, to 62.8. This mirrors an acceleration in other pricing data.

Meanwhile, manufacturers in the Philadelphia Fed district continued to be very upbeat in their outlook. The forward-looking composite index increased from 41.2 to 47.9, indicating vigorous expectations for growth in the next six months. More than 60 percent of those completing the survey see new orders rising in the months ahead, with 54.7 percent forecasting higher shipments. In terms of investments in the company, 43.2 percent and 45.4 percent anticipate additional hiring and capital spending, respectively, for the next six months.

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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