Manufacturing activity continues to lag improvements in the general economy. Surveys of manufacturing firms conducted by five regional Federal Reserve banks continue to show the negative impact of a tight monetary policy and the lagged effect of an aggressive fiscal policy.
Manufacturing in Philadelphia region remains the only bright spot, but even that seemed to be hanging on a thread.
Read more of RSM’s insights on manufacturing, the economy and the middle market.
The RSM US Manufacturing Outlook Index held at 1.3 standard deviations below levels of manufacturing activity that would normally be expected.
Negative results in the surveys indicate decreased manufacturing activity, while positive results indicate increased activity. The index has been negative since May 2022.
Despite the current sluggishness, firms in all but one region reported increased intentions to maintain capital expenditure, continuing this year’s uptrend.
New York
Manufacturing activity in New York continued to contract in May for the sixth month in a row. While current shipments held steady, there is the ongoing significant decline in new orders and labor conditions remained weak .
Confirming the sluggish activity, delivery times lessened and unfilled orders continued to fall modestly.
Only 37% of respondents expect conditions to improve in the next six months. The outlook for employment growth weakened noticeably and capital spending plans remained soft.
Survey responses were collected between May 2 and May 9.
Philadelphia
Manufacturing activity in the Philadelphia region softened, with 29% of firms reporting decreased activity in the May survey compared with 25% reporting increases. This slightly positive response came despite declines in key indicators.
Both the indices for new orders and shipments index fell to their first negative readings since January and February. The employment index has been negative for seven months in a row.
In special questions, firms expect their price increases to match inflation, while anticipating employee compensation costs to rise 3.5% over the next four quarters, down from 4.0%.
Survey responses were collected from May 6 to May 13.
Kansas City
Production was flat in Kansas City’s Tenth District with a mix of individual indicators. While current shipments and employment showed increases, new orders have been in decline since August 2022.
The May survey indicated that the pace of decline slowed in paper, chemical and fabricated metal manufacturing, while activity expanded in printing, nonmetallic mineral and furniture manufacturing.
On a positive note, the response of firms anticipating increased capital expenditure was at its highest level in nearly two years.
The survey was open from May 15 to 20 and included 97 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri.
Dallas
Manufacturing activity in Texas edged down in May. The new orders index showed some improvement but remained negative. And both the capacity utilization and shipments indexes slipped back into negative territory after turning positive last month.
The employment index slipped further, with only nine percent of firms noted net hiring, while 14 percent noted net layoffs.
Interestingly, firms continued to report increased capital expenditure, with large jumps in April and May.
Surveys were collected May 14–22, with 85 out of the 128 Texas manufacturers responding.
Richmond
Manufacturing activity in the Richmond region improved but remained sluggish in May. Shipments increased for the first time since last November, and although new orders continued to fall, there were signs of improvement.
Signs of the sluggishness Included the worsening in employment, moderation of wage increases, and declining
backlogs and vendor lead times in May. The average growth rate of prices received decreased as well.
The survey was released on May 29.
