Economic Indicators for U.S. Manufacturers (October 2023 Roundup)
With the final quarter of the year underway, the U.S. manufacturing sector appears to be turning a corner. Recent economic indicators indicate a shift from the hurdles that marked 2023, including softer demand, labor constraints, surging prices, and sluggish exports. Wondering what the latest data tells us? Get our key takeaways on labor, output, prices, optimism, regional performance, and more from October's most critical manufacturing business reports.
Executive Summary
• U.S. manufacturing output held steady in September, inching up 0.4% over August.
• U.S. manufacturers added 17,000 jobs in September, led primarily by the auto industry. This follows a 16,000-job gain in August.
• Manufacturing activity edged up again in September and is now skirting expansion with a composite reading of 49%. Output and employment both rebounded into expansion in September.
• New Orders for and shipments of manufactured goods both rose in August, according to the Census Bureau, while the trade deficit shrank.
• With the exception of the Kansas City region (encompassing Colorado, Kansas, Nebraska, Oklahoma, Wyoming, Northern New Mexico and Western Missouri) most regional surveys reported growth, with the Texas outlook survey hitting its highest level of the year.
Manufacturing Output & Capacity Utilization Hold Steady
Manufacturing output was little changed in September, inching up just 0.4%, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released October 17th. This follows a more subdued 0.1% increase in output reported for the sector in August. Meanwhile, the index for mining rose 0.4% and the index for utilities fell 0.3%. Overall, industrial production advanced 0.3% in September.
Meanwhile, manufacturing capacity utilization increased a marginal 0.1% to held steady at 77.8% in August --0.4% below its long-run average.
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September’s output was led by the wood products industry, up 2.4%, followed by plastics & rubber, up 1.7%; and primary metals, up 1.5%. These gains were offset by losses in printing and support, down 2.4% and apparel and leather, down 1.3%. Most other sectors registered little to no change in output.
New Orders, Shipments of Manufactured Goods on the Rise
The U.S. Census Bureau released its full report on manufacturers’ shipments, inventories and orders, October 4th, which found new orders for manufactured goods rose by 1.2 percent to $586.1 billion in August, following a 2.1 percent decrease in July. This was mainly driven by a 2.1 percent increase in nondurable goods orders, especially petroleum and coal products.
The report also found shipments of manufactured goods increased by 1.3 percent to $586.0 billion in August, after a 0.7 percent increase in July. This was led by a 2.1 percent increase in nondurable goods shipments, again boosted by petroleum and coal products.
Meanwhile, unfilled orders for manufactured durable goods grew by 0.4 percent to $1,335.9 billion in August, unchanged from the previously published increase. This was driven by a 0.6 percent increase in transportation equipment, which accounts for more than half of the total unfilled orders.
Inventories of manufactured goods edged up by 0.3 percent to $855.4 billion in August, following a 0.1 percent increase in July. This was due to a 0.5 percent increase in nondurable goods inventories, mainly petroleum and coal products.
Trade Deficit Shrinks
Meanwhile, the Census Bureau and Bureau of Economic Analysis found the U.S. trade deficit shrank by $6.4 billion in August, detailed in a report released October 5th. The decrease was driven by a rise in exports of goods and services, especially industrial supplies and consumer goods, and a fall in imports of goods, particularly cell phones and other household goods.
Hiring in the U.S. Manufacturing Sector Gains Momentum
Following a 16,000-gain in August, manufacturing employment in the United States added on another 17,000 jobs in September, according to the latest report from the U.S. Bureau of Labor Statistics, released October 6th. Meanwhile, the U.S. economy added 336,000 jobs overall in August, and the unemployment rate was little changed 3.8%.
Job gains in September were led by the transportation equipment sector, which added 10,000+ jobs. Other sectors adding jobs included plastics & rubber; chemicals; food manufacturing; and lumber/wood products.
Gains were offset by losses in printing and related support activities; computer & electronic product manufacturing; and beverage, tobacco, and leather.
Additionally, the U.S. Labor Department recorded 460,000 unfilled positions for the sector in August 2023, compared to nearly a million open positions reported a year ago.
U.S. Manufacturing Activity Improves Marginally
Also notable in October was the ISM’s monthly survey of purchasing executives, which found U.S. manufacturing activity appears to be digging itself out of the longest stretch of contraction seen since the Great Recession, with general business conditions advancing 1.4% to a reading of 49%--the highest level recorded since November 2022. While any reading below 50 indicates contraction, the sector is contracting at a much slower rate compared to previous months.
Demand improved in September, with the New Orders Index rising 2.4% to a level of 49.2%. Output improved significantly, rebounding into expansion with a reading of 52.5%. Employment also moved into expansion territory, hitting a reading of 51.2%.
In September, the New Export Orders Index remained in contraction for the fourth straight month, with a slight rise, while the Backlog of Orders Index showed a faster rate of contraction. On the supply side, faster deliveries persisted for the 12th month. Inventories remained in contraction for the seventh consecutive month. Prices returned to reductions after a brief pause in August.
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Regional Surveys Show Moderate Growth Overall
New York Manufacturing Survey The latest Empire State Manufacturing Survey
The latest Empire State Manufacturing Survey shows that business activity in New York State was barely changed in September 2023. The general business conditions index rose to 1.9, indicating a slight improvement from the previous month. However, new orders and shipments increased modestly, while employment and inventories declined. Input prices continued to rise at a similar pace, while selling prices increased faster. Firms remained optimistic about the future, expecting better business conditions and higher sales in the next six months.
Richmond Fed Manufacturing Survey
Manufacturing activity in the Fifth District improved slightly in September, according to a survey by the Richmond Fed. The composite index rose from −7 to 5, indicating a recovery from the previous month’s contraction. However, the level of the index was still low compared to earlier this year. Shipments, new orders, and employment increased modestly, while inventories decreased. Input and selling prices continued to rise at a fast pace, reaching their highest levels since 2021. Firms remained optimistic about the future, expecting better business conditions and higher sales in the next six months. They also planned to increase hiring, capital spending, and wages.
The Richmond Fed Manufacturing Survey encompasses data from manufacturers in Maryland, North Carolina, Virginia, West Virginia, and the District of Columbia.
Kansas City Manufacturing Survey.
Manufacturing activity in the Tenth District declined somewhat in September, according to a survey by the Kansas City Fed. The composite index fell from 0 to -8, indicating a contraction from the previous month. The decline was mainly driven by durable goods, especially metal manufacturing.
Most indicators of production, orders, shipments, and inventories were negative and decreased from previous readings. Employment and workweek remained steady, while input and selling prices increased. Firms reported that applicants for open positions were less qualified than six months ago, and that access to credit was unchanged for most firms. Firms expected slight improvement in business conditions and sales in the next six months.
The Kansas City survey gathers responses from companies in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, Northern New Mexico and Western Missouri.
Texas Manufacturing Outlook Survey
Texas factory activity resumed growth in September after a slump in August, according to a survey by the Dallas Fed. The production index, a key measure of manufacturing conditions, rose to 7.9, its highest level of the year. However, the general business activity and company outlook indexes remained negative, indicating continued pessimism among firms. Input and selling prices increased, while employment and workweek stayed steady. Firms expected slight improvement in the next six months. The survey also included special questions on remote work and the impact of federal legislation.
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