Manufacturing activity in the Mid-Atlantic region of the country cooled this month, according to new data from the Federal Reserve Bank of Philadelphia (FRBP). Specifically, the general business conditions index plunged from 34.4 to 19.9 in June, significantly worse than expected and the largest monthly decline since December 2014. Although disappointing, it is important to remember than any positive headline reading still implies net activity expansion, and June’s print remains well above the pre-election average.
Most of the weakness last month was due to a sharp drop in new orders, while measures of shipments and total employment improved. Forward-looking (6-months ahead) activity gauges were a bit more mixed in June, perhaps due to continued uncertainty about the potential trade war. Reported capital expenditure plans, though, still increased markedly. Managers in this month’s survey were also asked a few special questions about their expectations for business activity in the third quarter of 2018, and 58 percent of respondents see the pace of production growth accelerating in Q3. When asked how they will achieve the faster pace of growth, the most popular response from managers was to hire additional workers, while those that planned to keep staff levels the same said they would instead aim to increase hours worked and boost productivity.
Sources: Econoday, FRBPPost author: Charles Couch