Manufacturing activity in the central Atlantic region advanced for the seventh consecutive month in August, but at a more modest pace than a month earlier, according to the Richmond Fed's latest survey. All broad indicators — shipments, new orders and employment — continued to grow but at a rate below July's pace. Other indicators were mixed, however. Capacity utilization grew nearly on par with last month, while growth in backlogs flatlined. Vendor delivery times grew at a slightly quicker rate and manufacturers reported somewhat faster growth in finished goods inventories.
Looking ahead, assessments of business prospects for the next six months were less optimistic in August. Survey contacts anticipated slower growth in shipments, new orders, capacity utilization, and capital expenditures and expected declines in backlogs and vendor lead time.
Survey measures of current prices revealed that raw materials prices grew at a quicker pace in August, while finished goods prices grew on par with July. Respondents indicated that during the next six months they expected somewhat faster growth in raw materials prices, while they expected growth in finished goods prices to change little from what they had anticipated last month.
In August, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — declined five points to 11 from July's reading of 16. Among the index's components, shipments declined 11 points to 11, new orders slipped three points to finish at 10, and the jobs index eased three points to 12.
Other indicators varied. The backlogs of orders measure flattened, and the index for capacity utilization was virtually unchanged at 14. The delivery times index picked up four points to end at 8. Our gauges for inventories were mixed in August. The finished goods inventory index edged up three points to 11, and the raw materials inventory index trimmed two points to finish at 9.
Labor market activity changed little in August. The manufacturing employment index registered a 12 versus July's reading of 15, and the average workweek measure lost two points to 14. In addition, wage growth held steady at 13.
In the August survey, contacts were less confident about their business prospects during the next six months. The index of expected shipments plummeted 23 points to 7, and the new orders index fell eight points to 16. In addition, the capacity utilization index moved down 19 points to 10, while the backlogs and vendor lead time indicators turned negative, losing 22 and 14 points, respectively, to end at −1 for both measures. Moreover, planned capital expenditures posted a nine-point loss to 8.
District manufacturers' hiring plans were also less positive than a month ago. The expected manufacturing employment index reversed its 11-point gain in July to finish at 11, and the average workweek indicator retreated 15 points to 1. Furthermore, the expected wages index posted an eight-point loss to 16.
District manufacturers reported that raw materials prices increased at an average annual rate of 2.19 percent — a pickup from July's reading of 1.59 percent. Finished goods prices were unchanged — matching June's 1.45 percent pace.
Looking forward, respondents expected that the prices they pay will advance at a 2.21 percent pace, slightly above the previous month's expectation of 1.74 percent. Additionally, contacts looked for finished goods prices to increase at a 0.91 percent annual rate, a tad below last month's expectation of 0.96 percent.
Senior Economic Analyst