The RSM US Manufacturing Outlook Index declined in March to 1.8 standard deviations below the levels of activity that would normally be expected, reflecting sluggish activity across the production sector in general and the problems at Boeing in particular.
Only the Philadelphia region offered signs that the animal spirits were restive, reporting modest growth overall and an increase in new orders for the first time in four months.
Our index has been negative since May 2022, and for most of that time, it has been significantly negative. Domestically, this contractionary trend points to the importance of Boeing, the United States’ largest exporter, and the auto industry.
Read more of RSM’s insights into manufacturing and the middle market.
Globally, manufacturers have been contending with the increased cost of credit, the drop in demand stemming from tight monetary policies, and market distortions caused by China’s export policies.
The decline in manufacturing is occurring at a time when the United States and its trading partners among the developed world are adopting industrial policies.
The immediate positive effect in the U.S. has been in the construction industry. But it will take time for the policy to fully realized.
New York
Business activity declined in New York State for the fourth month in a row. Firms reported a significant decline in new orders, along with lower shipments, unfilled orders and inventories. Nearly half, or 46%, of firms reported diminished activity; a quarter reported gains.
Labor market indicators weakened as employment and hours worked both decreased. The growth in input prices moderated somewhat, while selling price increases held steady.
Survey responses were collected between March 4 and March 11.
Philadelphia
While a majority of manufacturing firms in the Philadelphia region reported little change in activity in March, the new orders index was positive for the first time in four months. Current shipments were positive for the second month in a row, a pattern that did not occur last year.
Employment continued its yearlong decline, while prices paid continued their six-month decline.
Interestingly, there was a substantial increase in reports of intentions to increase capital expenditures.
In special questions, firms reported increased production in the first quarter compared with the end of last year, but with capacity utilization remaining at 70% to 80%, most firms reported being constrained by a lack of labor.
Survey responses were collected from March 11 to March 18.
Dallas
Manufacturing firms in Texas reported a slight decline in output in March after stabilizing in February. Both new orders and current shipments plunged. Labor market measures remained positive while suggesting slower job growth and shorter workweeks during the month.
Wages and benefits held steady at a near-average reading, and the raw materials prices index rise but remained below average.
The survey was collected March 12 to March 20, with 87 of 126 Texas manufacturers submitting a response.
Richmond
Manufacturing activity in the Richmond region declined in March for the fifth month in a row. New orders have been declining for two years. Current shipments remained solidly negative. Employment fell from positive to neutral. Capacity utilization continued to decline.
Capital expenditures continued their negative run since December while spending on equipment and software continued to decline as well.
Results were released on March 26 and were based on responses from 75 to 80 firms.
Kansas City
Manufacturing activity in Kansas City’s Tenth District declined again in March. The drop in current shipments reversed last month’s modest gains, while new orders plunged, continuing the decline since June 2022
Nevertheless, employment continued to climb, even as the average employee workweek declined during the month.
Decreases occurred in both durables and nondurables, with primary metal, electrical equipment and paper manufacturing driving the decline.
In special questions, 42% of firms reported they have invested or plan to invest in labor-saving and productivity-enhancing technology at a pace similar to the past, while 27% have invested at a faster pace.
Comments included concerns regarding high interest costs and the high cost of labor.
The survey was open for a six-day period from March 20 to March 25 and included 96 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern
New Mexico and western Missouri.
