Fifth District Survey of Manufacturing Activity



December 23, 2008 10 a.m.

Production Activity Deteriorates Further in December, But Manufacturers Remain Optimistic



The contraction in manufacturing activity in the central Atlantic region deepened this month, according to the Richmond Fed's latest survey. The index of overall activity was pushed sharply lower as shipments, new orders, and employment slid further into negative territory. Evidence of continued weakness was also seen in all other indicators. District contacts reported that orders backlogs and capacity utilization retreated further into negative territory and declined from November's readings. Moreover, vendor delivery times contracted, while growth in inventories remained on pace with November.

Looking forward, assessments of business prospects for the next six months were generally more optimistic in December. Contacts at more firms anticipated that shipments, new orders, backlogs and capacity utilization would grow during the next six months.

On the price front, both raw materials and finished goods prices grew at a quicker pace in December. Looking ahead, respondents said in December that they expected growth in both raw materials and finished goods prices to rise more slowly during the first half of 2009 than they expected in November.

Current Activity

In December, the seasonally adjusted manufacturing index — our broadest measure of manufacturing activity — decreased to −55 from November's reading of −38. Among the index's components, shipments plummeted 24 points to −55, new orders fell 18 points to −66, and the jobs index pulled back eight points to finish at −40.

Other indicators also suggested weaker activity. The capacity utilization index dropped 16 points to −50 and the orders backlogs index declined 14 points to −59. Furthermore, vendor delivery times shed five points to −14. Meanwhile, our gauges for inventories changed little in December from November; the finished goods inventory index edged down three points to 32, while the raw materials inventory index added two points to finish at 30.

Activity Index
Shipments Index
New Orders Index


Labor market conditions at District plants weakened further in December as firms continued to downsize their staff, reduce the workweek and scale back paychecks. The employment index registered a −40 versus November's reading of −32, and the average workweek indicator dropped 17 points to −47. In addition, the wage index fell five points to −8.

Employment Index


In the December survey, our contacts were generally more optimistic about their business prospects for the next six months. The index of expected shipments increased 15 points to 27, and the new orders indicator moved up 13 points to end at 27. Moreover, the orders backlogs index jumped 17 points to 18. Vendor delivery times picked up six points to 2, and capacity utilization leaped 19 points to 32. In contrast, readings on planned capital expenditures were negative for the fourth consecutive month but picked up 30 points this month to end at −5.

District manufacturers' hiring plans in December were mixed. The expected manufacturing employment index held steady at −17, while the average workweek index moved up 13 points to end at 21. Additionally, the expected wage index posted a three-point gain to 32.


District manufacturers reported that raw materials prices increased at an average annual rate of 2.54 percent in December — a sharp uptick from November's reading of 1.51 percent. Finished goods prices also posted a marked increase from November, rising at a 0.95 percent pace in December compared to last month's series low of −1.19 percent. Looking ahead, respondents expected that the prices they pay will advance at a 1.64 percent pace — down considerably from their 4.20 percent forecast in November. Additionally, contacts looked for finished goods prices to increase at a 1.62 percent annual rate during the next six months — down notably from the previous month's expectation of 2.65 percent.

Current Price Trends
Contact Us


Judy Cox
Senior Economic Analyst
(804) 697-8152