Manufacturing activity in the Mid-Atlantic region of the country remained elevated this month, according to new data from the Federal Reserve Bank of Philadelphia. Specifically, the general business conditions index ended October at 22.2, a fractional decline from the prior month but significantly better than anticipated and well above pre-election levels. Under the hood, new orders declined in October, but measures of shipments, total employment, and hours worked improved. With respect to inflation, profit margins increased this month, as prices paid rose at a slower pace and prices received jumped.
That suggests businesses are trying to take advantage of strong customer demand by passing on rising input costs. Moreover, a major production expense is the cost of labor, which has risen markedly over the past year as the competition for talent continues to become more difficult. Many surveyed managers also said that they expect to have to invest in new equipment and technology to further improve capacity in 2019. Government policies, though, will continue to have an impact on this because around four in ten surveyed managers said that tax reform has enabled them to boost their capital spending in 2019, but 18.9 percent of respondents said that tariffs are likely to weigh on their business investments next year.
Sources: Econoday, FRBP
Post author: Charles Couch