Fifth District manufacturing activity remained sluggish in October, according to the most recent survey by the Federal Reserve Bank of Richmond. New orders and backlogs decreased this month, while shipments flattened. Hiring activity strengthened mildly across firms and wage increases were more widespread. Prices of raw materials and finished goods rose more quickly in October, compared to last month.
Firms looked for better business conditions during the next six months. Manufacturers expected positive growth in shipments and in the volume of new orders. In addition, manufacturers looked for rising backlogs of new orders. Producers anticipated increased capacity utilization and looked for slightly longer vendor lead times.
Survey participants' outlook for the months ahead included moderate growth in hiring, while future wage increases outweighed declines in the October expectations index. Producers anticipated somewhat longer average workweeks. Firms expected faster growth in prices paid and prices received.
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Overall manufacturing conditions remained sluggish this month. The composite index for manufacturing remained negative; however, the index added four points to end at a reading of −4. The new orders indicator also remained negative this month, ending at a reading of −12, while the shipments index flattened to a reading of 2. The manufacturing employment index moved up to a positive reading, adding 16 points to end at 3.
Backlogs decreased in October, with the index settling at −11. The capacity utilization index remained negative; however, it decreased at a slower rate compared to last month as the index ended at −5. Vendor lead time lengthened slightly this month, with that index adding two points to end at 7. Finished goods inventories rose across more firms than they fell, although the index lost two points, ending at a reading of 18. Similarly, growth in raw materials inventories outweighed declines in October, with that indicator remaining positive but moving down three points to 22.
Hiring at Fifth District manufacturing firms strengthened mildly compared to October. The manufacturing employment index gained 16 points to end at 3. The average wage index remained at an elevated level this month. That indicator added five points to end at 18, while the average workweek index slipped three points to end at −3.
Producers expectations were more upbeat this month, bouncing back from last month's somewhat lower outlook. Manufacturers looked for moderate growth in shipments and new orders. The indexes for expected shipments and new orders ended at readings of 35 and 32, respectively.
Survey participants expected backlogs would build up in the next six months. The outlook index gained five points to finish at a reading of 18. Firms expected vendor lead times to lengthen — the indicator ended five points higher at a reading of 12. Manufacturers looked for rising capital expenditures over the next six months — the expected index strengthened six points to 19. The October index for future capacity utilization remained solid, adding six points to finish at 28.
Hiring increases for the next six months were more widespread. The expectations index for the number of employees jumped to a strong reading of 20. The index for expected average wages remained about on pace with last month's expectations. The expected average workweek indicator slipped by four points to a reading of 6.
Prices of raw materials rose at an annualized 1.17 percent rate, somewhat faster than September's 1.10 percent pace. Prices of finished goods rose at a 0.64 annualized rate, slightly faster than September's 0.07 percent pace.
For the six months ahead, survey participants anticipated input prices would grow at a 1.51 percent pace, while finished goods prices were expected to rise at an annualized 0.71 percent rate.
Associate Regional Economist