Economic indicator reports released in the month of March suggest U.S. manufacturers across all regions are still contending with waning demand, with some notable bright spots on the horizon. Get the latest data on manufacturing output and capacity utilization, prices, optimism, and regional performance in our key takeaways from March’s most critical manufacturing business reports.
Executive Summary
• Manufacturing output and capacity utilization were largely unchanged in February.
• Output gains in manufacturing in were led by computer & electronic products manufacturing and chemicals, while declines were led by textiles and plastics & rubber.
• U.S. manufacturing employment declined for the first time since March 2021, down 4,000 net jobs.
• However, the number of unfilled manufacturing jobs remains historically high, rising to 791,000 open positions.
• While still in contraction territory, U.S. manufacturing activity accelerated in February, with new orders advancing 4.5%.
• ISM Chairman noted sluggishness in the sector was showing signs of improvement, with companies preparing for growth in the second half of the year.
• Regional surveys reflect continued depressed manufacturing activity across the board, with Texas activity contracting for the first time since the pandemic. The Kansas City region fared the best while the New York region fared the worst.
Manufacturing Output Stalls
U.S. manufacturing production increased marginally in February, up 0.1%, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released March 15th. Meanwhile, the index for mining fell 0.6%, while the utilities index increased 0.5%. The Fed’s overall industrial output index for February was unchanged over January, sitting 0.2% below February 2022 levels.
Meanwhile, manufacturing capacity utilization edged down 0.1% in February to a reading of 77.6%. The Fed notes this is 0.6% below the sector’s long-run average.
Manufacturing sectors that saw increases in capacity utilization in February included wood products, electrical equipment, chemicals, and computer and electronic products. Decreases in capacity utilization were seen in textile and product mills, apparel and leather, and machinery, among others.
Most U.S. industrial sectors posted marginal losses in output in February. These included textile and product mills, down 2.1%; plastics and rubber products, down 1.8%; paper, down 0.9%; and apparel and leather, down 0.8%.
These were offset by gains in a few select sectors, led by computer and electronic products, which rose 1.2%; chemicals, which also added 1.2%; and wood products, up 1.1%.
Notably, apparel and leather as well as motor vehicles and parts were the clear winners for year-over-year output gains, each up 10.8% from this time last year. This was followed by aerospace and miscellaneous transportation equipment, up 5.4% year-over-year. Most other sectors reported year-over-year losses.
Manufacturing Employment Declines; Unfilled Positions Rise
Job creation in the U.S. manufacturing sector stalled in February, according to the latest jobs report by the U.S. Department of Labor. The sector shed 4,000 net positions in February, marking the first time the sector has posted a loss since March 2021.
Read more: U.S. Manufacturing Employment Declines in February
In February, employment losses were sharpest in plastics and rubber products, which shed 4,700 positions. Furniture manufacturing, textile mills, apparel manufacturing, and paper mills also saw employment decline.
These losses were offset by gains largely in computer and electronic products, which gained 2,800 jobs, followed by chemical manufacturing, which added 2,500. Navigational, measuring, electromedical, and control instruments added 1,500 jobs.
Meanwhile, the latest JOLTS (Job Openings and Labor Turnover Survey) reported the number of unfilled job openings in the sector has risen to 791,000.
PPI Decreases in February
The Bureau of Labor Statistics reported on March 15th, that its Producer Price Index (PPI) for final demand goods decreased 0.2% in February. This follows a 1.2% increase for January, and a 0.2% decrease in December. February’s decline was largely attributed to a 2.2% decrease in price for final demand foods.
Manufacturing Activity Contracts Less Sharply
Meanwhile, February marked the U.S. manufacturing sector’s fourth straight month of contraction, according to the latest survey by the Institute for Supply Management released March 1st.
However, ISM data suggests conditions in the sector have improved marginally, with the ISM’s overall index rising 0.3% to a reading of 47.7, suggesting the sector is still contracting—but not as sharply as it was in January.
While still in contraction, demand improve for the sector, with that metric advancing 4.5% to a reading of 47%. Meanwhile, production continued to slow, down 0.7% to 47.3%.
Timothy Fiore, Chairman of the ISM, noted sluggishness in the sector was showing signs of improvement and that companies are expecting a stronger latter half of 2023. “The February composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the second half of the year,” said Fiore.
Four of eighteen industries surveyed by the ISM reported growth in February: apparel, leather & allied products; transportation equipment; petroleum & coal products; and electrical equipment.
Related: Selling in a Downturn: Opportunities & Best Practices
Regional Manufacturing Activity Down Across the Board
New York Manufacturing Survey: Manufacturing activity in the New York region worsened in March, according to the latest Empire State Manufacturing Survey. The survey finds the general business conditions index for manufacturers in the region declined 19 points to a reading of -24.6, continuing what the Fed states as a “see-saw” pattern of “ups and downs within negative territory.”
The report found new orders fell sharply, down 14 points to -21.7%; while shipments fell 14 points to -13.4%. Employment declined for a second straight month, down 4 points to -10.1%.
Philly Fed Manufacturing Index: Covering Pennsylvania, New Jersey, and Delaware, the Philly Fed Manufacturing Index fared similarly in March, with manufacturing activity stuck in a negative reading of -23.2%. This stands as the region’s seventh consecutive negative reading. The report notes the survey’s broad indicators for manufacturing activity were all negative.
Richmond Fed Manufacturing Survey Manufacturing activity in the 5th District, which includes Maryland/D.C.; North Carolina, South Carolina, Virginia and most of West Virginia, also reported deterioration i in business conditions for manufacturers, with the survey’s composite manufacturing index decreasing from -11 in January to -16 in February.
New orders remained unchanged at -24, while shipments and employment—the other two major components of the index—declined further.
Kansas City February Manufacturing Survey: Factory activity in the 10th district (encompassing Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and Western Missouri) held steady in February, posting a reading of “0” –a slight improvement over January’s -1 reading and December’s -4 reading.
The reports finds decreased activity at non-durable goods plants, particularly in plastics, chemicals, and food manufacturing.
Texas Manufacturing Outlook Survey: Meanwhile, Texas manufacturing activity contracted for the first time since the pandemic. The Texas Manufacturing Outlook Survey found production, the survey’s key measure of business conditions, fell to a reading of -2.8 in February from 0.2 in January.
Demand continued to slide, with the new orders index posting a negative reading for a ninth straight month. Capacity utilization turned negative, falling to -4.1, while shipments were unchanged at -5.0.
Employment came in flat for the region in February, with the employment index declining to -1.
Meanwhile, the survey’s general business activity index remained in negative territory in February, but improved slightly, rising several points to a reading of -2.9.
Find and Attract New Business in the Industrial World with MNI
Powered by trusted MNI data, IndustryNet is an industrial marketplace that connects industrial buyers with 400,000 U.S. manufacturers and suppliers of more than 10,000 types of products and services and helps suppliers increase their visibility among domestic procurers. Set up a free account, search for suppliers, send quote requests and more with this free industrial marketplace.
MNI also makes it easy for industrial companies to expand into new markets. Click here to learn about how an IndustrySelect subscription can help you develop the right pool of leads for your product.
