Manufacturing activity in the northeast region of the country picked up in May, according to new data from the Federal Reserve Bank of New York. Specifically, the general business conditions index jumped from 15.8 to 20.1 this month, much better than anticipated and helped by solid gains in new orders, shipments, unfilled orders, and total employment. Prices paid, though, continued to rise faster than prices received. That puts additional strain on profit margins and some firms appear to have responded by reducing workers’ hours. Looking ahead, surveyed manufacturers’ optimism about the next six months rebounded in May, including a greater number of reported plans to boost capital expenditures and invest in technology.
Also encouraging was the latest report on manufacturing activity in the Mid-Atlantic region of the country from the Federal Reserve Bank of Philadelphia (FRBP). Indeed, the general business conditions index surged from 23.2 to 34.4 in May, significantly better than expected and the highest headline reading in a year. Measures of new orders, shipments, and employment all improved this month, and inflation pressures moderated. Forward-looking (6-months ahead) gauges were a bit more mixed but still near historically high levels across the board. Altogether these two solid reports, along with yesterday’s positive data on industrial activity in America, suggest that recent tariff threats and general uncertainty about trade policy have yet to weigh heavily on U.S. manufacturers. That bodes well for gross domestic product, and the Federal Reserve Bank of Atlanta even sees GDP in the second quarter of 2018 expanding at nearly double the Q1 pace.
Sources: Econoday, FRBNY, FRBP, FRBSLPost author: Charles Couch