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Economic Indicators for U.S. Manufacturers (March 2024 Roundup)

Posted by IndustryNet on Tuesday, March 19, 2024

 Economic Indicators for U.S. Manufacturers in March


Key economic reports released in March paint a complex picture for US manufacturing. Manufacturing output rebounds and some regional surveys hint at recovery, but overall activity remains in contraction and hiring has stalled. Wondering what the latest data tells us? Get our key takeaways on labor, output, prices, optimism, regional performance, and more from March's most critical manufacturing business reports!

Economic Indicators for U.S. Manufacturers: Executive Summary

• U.S. manufacturing output rebounded slightly in February, climbing 0.8%, while capacity utilization rose 0.6%.
• After January’s big boost in employment, hiring in U.S. manufacturing lost steam, with the sector shedding 4,000 jobs.
• Similarly, manufacturing activity took a step back from its January high, easing further into contraction.
• The PPI (Producer Prices Index) finds prices rose slightly in February.
• The most recent data from the Census Bureau found final sales of manufactured goods fell in January, while inventories remained steady (data reported in March for January).
• The most recent regional surveys found much of the U.S. manufacturing sector remains in contraction, though the rate of contraction has slowed across most regions.

Let’s dive into the details on the most critical economic reports released in the month of March:

 Manufacturing Output on the Rise

After declining in February, manufacturing output rebounded in March, rising 0.8%. This is according to the Federal Reserve’s Industrial Production and Capacity Utilization report released March 15th.

Meanwhile, the index for mining rose 2.2%, while the index for utilities fell 7.5% due to the unusually warm weather. Overall industrial production edged up 0.1% according to the latest report.

In February, manufacturing capacity utilization was also on the rise, advancing 0.6% to 77% and sitting 1.2% below its long-run average.

Related: How Outsourced Industrial Prospecting Can Help Your Manufacturing Company Survive Uncertain Times

Taking a look at the industry groups, February’s manufacturing output increases were spread across multiple sectors and was strongest in wood products (+2.4%); miscellaneous manufacturing (+2.3%); motor vehicles & parts (+1.8%); furniture (+1.8%); machinery (+1.7%); chemicals (+1.6%); and printing and support related activities (+1.5%).

Meanwhile, output losses in the manufacturing sector for February were few and far between, limited to apparel and leather (-0.3%); primary metals (-0.2%) and nonmetallic mineral products (-0.2%).

Looking at year-over-year losses and gains in output, Computer & electronic products saw a 7.9% increase in production; aerospace saw a 7.3% increase in output, while motor vehicles & parts gained 3.5%.

U.S. Manufacturing Activity Walks Back January Gains

After nearing expansion in January, the Institute for Supply Management’s index of manufacturing activity fell 1.3% to 47.8, its lowest level since October 2023 and marking the sector’s sixteenth straight month of contraction. The report found that new orders, production and employment decreased, while exports were on the rise and prices cooled slightly.

Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee, remarked that the manufacturing sector persisted in grappling with difficulties arising from the global economic deceleration, trade frictions, supply chain interruptions, and labor scarcities. Despite these challenges, he also conveyed a sense of optimism, noting that “Demand is at the early stages of recovery, and production execution is relatively stable compared to January, as panelists’ companies begin to prepare for expansion.”

Of eighteen industries tracked, eight reported growth in the month of February, led by apparel, leather & allied products, nonmetallic mineral products, and primary metals.

Inflation Advances Slightly

The latest Producer Price Index (PPI) report, released by the Bureau of Labor Statistics on March 14th indicates a slight increase in wholesale prices for February. The index for final demand rose 0.6% seasonally adjusted, following a 0.3% increase in January. While this is still elevated compared to the Federal Reserve's target, it's a slower pace of increase compared to recent months. The report also find that in February, nearly two-thirds of the rise in final demand prices can be traced to the index for final demand goods, which advanced 1.2 percent.

Manufacturing Sales Dip, Inventories Hold Steady 

The latest Manufacturing and Trade Inventories and Sales report from the Census Bureau (March 14th, 2024) paints a mixed picture for U.S. manufacturing. While combined sales of manufactured goods dipped 1.3% from December, even as inventories held steady, suggesting a potential pause in production after recent declines. This is further supported by a flat year-over-year comparison for inventories. However, a slight increase in the inventory-to-sales ratio (1.39) indicates a slowdown in sales velocity compared to December 2023. This suggests manufacturers might be cautious about ramping up production until sales pick up. 

Related: Selling in a Downturn: Opportunities & Best Practices

Hiring in the U.S. Manufacturing Sector Stalled 

After adding 23,000 jobs in January, hiring in the U.S. manufacturing sector took a step back, with the industry shedding 4,000 jobs.

Meanwhile, the Job Openings and Labor Turnover (JOLTS) survey, shows that unfilled positions in U.S. manufacturing edged up in recent months, with the number of open positions at 608,000.

Job losses were led by the chemicals sector, followed by transportation equipment, food manufacturing, and computers and electronics. These gains were offset by losses in fabricated metals, electrical equipment, wood products, and textiles.

Regional Manufacturing Activity Mixed

New York region Manufacturing Activity Contracts in March, But Optimism Remains 

Manufacturing in New York took a hit in March, according to the latest Empire State Manufacturing Survey from the Federal Reserve Bank of New York. The headline General Business Conditions index plunged to -20.9, signaling a significant decline in factory output for the second consecutive month. New orders and shipments also suffered, with their respective indexes dipping into negative territory at -27.3 and -14.2. These numbers point to a slowdown in demand and deliveries. Despite the current contraction, a silver lining emerges: the Future Business Conditions index remained positive at 6.8. This suggests that New York manufacturers, though facing challenges, still hold some optimism for an improvement in activity over the coming months.

Philly Fed Survey Hints at Growth, But Employment Declines

The February Manufacturing Business Outlook Survey from the Philadelphia Fed paints a mixed picture for manufacturing activity in the region. While there are signs of potential growth, some challenges remain.

The headline index, a gauge of overall manufacturing conditions, rose to 2.0 in February, indicating a possible shift towards expansion after several months of contraction. Additionally, the new orders index climbed into positive territory at 3.8, suggesting an increase in demand for manufactured goods.

However, not all indicators are positive. The employment index dipped into negative territory at -2.3, signaling potential job losses within the region's manufacturing sector. Prices also remain a concern, with the current prices index staying elevated at 22.3.

Cautious Optimism in Richmond Fed Survey Despite Manufacturing Decline

The latest Richmond Fed Manufacturing Survey, which covers the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia, offers encouraging signs for the Fifth District's manufacturing sector. The composite index jumped from -15 in January to -5 in February, indicating a notable improvement in overall manufacturing activity.

This positive shift is further supported by a rise in the employment index to 7, suggesting potential job growth within the region's factories. However, a note of caution remains. New orders, a key indicator of future production, continued a negative trend with an index of -5. This suggests manufacturers might still be apprehensive about ramping up production significantly despite the recent uptick.

Kansas City Region Manufacturing Slowdown Eases Slightly, Future Looks Uncertain

The latest Kansas City Fed Manufacturing Survey, released in February, indicates a potential turning point for the region's manufacturing sector (encompassing Colorado, Kansas, Nebraska, Oklahoma, Wyoming, and parts of New Mexico and Missouri). The composite index rose slightly to -4 in February from -9 in January, suggesting a moderation in the recent decline of manufacturing activity. However, production and new orders remain in negative territory, at -17 and -14 respectively, highlighting ongoing weakness in output and demand.

Texas Manufacturing Stabilizes After January Dip, Cautious Outlook Persists

The Texas Manufacturing Outlook Survey, released by the Dallas Fed in February, reveals some stability in the Lone Star state's manufacturing sector after a major decline in January. The production index rebounded sixteen points to a reading of 1.0, indicating flat output month-over-month. Other measures of manufacturing activity, like capacity utilization and shipments, also showed signs of stabilization with indexes hovering near zero (neutral territory).

However, the report doesn't paint a completely rosy picture. Perceptions of broader business conditions remain negative, though less so than January. The employment index, while positive at 5.9, suggests slower job growth compared to previous months. Notably, the future production index held steady at 22.4, indicating that manufacturers are cautiously optimistic about activity levels in the coming months.

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