Manufacturing Indices Show Mixed Results

Written by Sandy Williams

Two Federal Reserve manufacturing indices came out this week showing a contrast between business conditions in the Richmond and Texas regions.

Federal Reserve Bank of Richmond

Manufacturing in the Fifth District improved in June with more manufacturing executives expressing optimism for the next six months. The composite index rose six points to register 7 on strength from new orders and shipments. Inventories were reported as higher for both finished goods and raw materials. Current pricing moderated for the month but manufacturers expect input prices to increase in the next six months. Employment indices were mostly steady although the wage index dropped to 9 from 23 in April. Employment ranks are expected to swell during the next six months.

Federal Reserve Bank of Dallas

Texas manufacturing expansion slowed in June. The production index fell 11 points to 12.3, along with declines to single digits for new orders and growth of new orders at 9.6 and 4.7, respectively. Shipments declined from a May reading of 24.7 to 8.5 this month. Growth moderated for prices paid and received. The raw material inventories index increased 10.3 points along with a slight increase in finished goods inventory. Employment levels were up slightly from an index reading of 8.3 to 9.6. The general business index lost 2.2 points to register 15.0.

Texas manufacturers were somewhat less optimistic in June about future business conditions. New orders are expected to pick up but most future indices showed declines from last month.

Manufacturers of fabricated metal products in Texas had the following comments:

  • We are seeing extremely strong price competition for our products, with increased foreign pressure for the project work. Wage pressure is coming from the continued capital project work along the Gulf Coast.
  • We have experienced a lull in new orders, which seems to be the result of contractors digesting previous work backlogs. Having said that, there has been widespread dissatisfaction among contractors regarding the lack of progress on tax reduction and health care reform.
  • Some projects are being let, finally. Here’s my take on the Texas economy: If you won the bid and have the business, you are busy. If you didn’t get the bid, you are not. Meaning, this is not a rising-tide economy where everyone is busy—it is spotty and super competitive.
  • Energy sector sales have remained strong since fourth quarter 2016. Quote activity for the industrial sector is improving.

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