Manufacturing activity in the central Atlantic region expanded for the fourth straight month, according to the Richmond Fed's latest survey. Looking at the main components of the overall index, shipments and new orders grew more slowly, while employment growth held steady. Other indicators varied but suggested continued solid activity. Manufacturers reported that backlogs grew at a slightly slower pace and that increases in capacity utilization and delivery times eased somewhat, while finished goods inventories grew at a somewhat slower rate.
Looking forward, manufacturers' optimism remained in place in January. Survey contacts at more firms looked for steady growth in shipments, new orders, backlog of orders, and capacity utilization in the next six months.
Survey measures of current prices revealed that prices of raw materials grew at a slightly quicker pace in January, while finished goods prices were little changed. Respondents indicated that during the next six months they expected somewhat slower growth in both raw materials and finished goods prices from what they had anticipated last month.
In January, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — fell seven points to 18 from December's reading of 25. Among the index's components, shipments dropped seven points to 23, new orders lost twelve points to finish at 17, and the jobs index was unchanged at 14.
Other indicators generally suggested continued solid growth. The index for capacity utilization edged down three points to 18, and the backlogs of orders grew more slowly, losing nine points to 5. The delivery times index eased two points to end at 15, while our gauges for inventories were mixed in January. The finished goods inventory index trimmed four points in January to end at 7, while the raw materials inventories index was unchanged at 9.
Hiring conditions continued to firm at District plants in December. The manufacturing employment index held steady at 14, while the average workweek measure continued to move higher, picking up five points to 20. In contrast, wage growth dropped three points to 13.
In the January survey, our contacts remained generally optimistic about their business prospects during the next six months. The index of expected shipments inched down five points to end at 38, while the new orders, backlogs and capacity utilization indexes each dropped seven points to 40, 18, and 34, respectively. Planned capital expenditures edged up two points to 29, while the vendor lead time index fell five points to 12.
District manufacturers' intentions to expand hiring were also generally optimistic in January. The expected manufacturing employment index declined six points to 17, while the average workweek indicator improved two points to 13. In contrast, the expected wages index posted a ten-point gain to finish at 44.
District manufacturers reported that raw materials prices increased at an average annual rate of 2.79 percent from December's reading of 2.53 percent. Finished goods prices rose at a 2.17 percent pace, nearly unchanged from December's reading of 2.13 percent last month.
Looking ahead, respondents expected that the prices they pay will advance at a 3.17 percent pace compared to December's reading of 3.70 percent. Additionally, contacts looked for finished goods prices to increase at a 2.34 percent annual rate, a tad below last month's expectation of 2.41 percent.
Senior Economic Analyst