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Fifth District Survey of Manufacturing Activity

Sept. 22, 2015 10 a.m.

Manufacturing Sector Activity Generally Softened; Average Wages Grew Moderately

  • Overview

    Fifth District manufacturing activity slowed in September, according to the most recent survey by the Federal Reserve Bank of Richmond. Order backlogs and new orders decreased, while shipments declined. Average wages continued to increase at a moderate pace this month, however manufacturing employment grew mildly. Prices of raw materials and prices of finished goods rose, although at a slightly slower pace compared to last month.

    Manufacturers anticipated improved business conditions during the next six months. Producers expected faster growth in shipments and in the volume of new orders. Additionally, survey participants expected order backlogs to grow and anticipated increased capacity utilization. Expectations were for longer vendor lead times during the next six months.

    Firms expected faster growth in the number of employees and looked for average wages to grow more quickly in the months ahead. In addition, survey participants looked for moderate growth in the average workweek. Looking ahead, manufacturers anticipated faster growth in prices paid and prices received.

  • Current Activity

    Overall, manufacturing conditions weakened in September. The composite index for manufacturing decreased to a reading of −5, following last month's reading of 0. The index for shipments remained negative, only gaining one point to end at −3. Additionally, the volume of new orders decreased this month. At an index of −12, the September indicator lost 13 points from last month's reading of 1. Manufacturing employment increased mildly this month. The indicator added two points, ending at a reading of 3.

    Capacity utilization decreased this month. The index fell 14 points from August's reading to finish at a reading of −19. Additionally, backlogs softened further this month, pulling the index down nine points to finish at −24. Vendor lead time lengthened. The index moved down only two points to a reading of 7. Finished goods inventories rose at a slightly slower rate than a month ago. The index lost three points to end at 21. Raw materials inventories also rose at a slower rate this month. That gauge lost two points to end at 22.

    Manufacturing Activity
    Manufacturing Shipments
    Manufacturing New Orders
  • Employment

    Manufacturing employment increased mildly this month. The index gained two points to end the survey period at 3. However, the average workweek indicator dropped sharply to a reading of −12 from a reading of 3, while the gauge for average wages remained at a solid reading of 15 for a second month.

    Manufacturing Employment
  • Expectations

    Producers anticipated positive business conditions for the six months ahead. They continued to expect steady growth in shipments and in the volume of new orders. The indexes for expected shipments and new orders strengthened to readings of 48 and 42, respectively.

    Survey participants expected backlogs would build more quickly in the months ahead. That outlook index lost six points to finish at a reading of 19. Firms anticipated vendor lead times would lengthen slightly in the months ahead. That index added four points to finish at 10. Producers expected capital spending would grow more quickly. The index for future capacity utilization also strengthened, gaining four points this month to end at a reading of 33.

    Firms planned to increase hiring in the months ahead, with the expectations index gaining seven points from last month's index for expected employment to end at 26. The index for expected average wages remained solid, moving up nine points to finish at 43, while the expected average workweek gauge also strengthened slightly to a reading of 18.

  • Prices

    Prices of raw materials rose more slowly this month, advancing at an annualized 0.57 percent rate, compared to the previous 0.80 percent rate. Prices of finished goods rose at a 0.47 annualized rate, slowing slightly from August's 0.71 percent pace.

    Survey respondents expected input prices would rise more quickly for the six months ahead, at an annualized 1.00 percent pace. Finished goods prices were also expected to rise more quickly, increasing at an annualized 1.01 percent rate compared to the previous outlook for 1.20 percent growth.

    Manufacturing Price Trends
  • Index Table

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Regional Survey Team (804) 697-8702