Federal Reserve Findings Show Signs of Improvement in Manufacturing
Data from the national Federal Reserve and regional banks show improving sentiment across the manufacturing industry.
The Federal Reserve reported June 16 that total industrial production increased by 1.4% in May as many factories around the country returned from lockdowns to reopen production at reduced rates. Nationally, the industrial production rate remains below 15.4% below its level in February, before the COVID-19 pandemic began negatively impacting production in March. Output rose 3.8% in May as most major industries posted increases, including motor vehicles and parts.
Capacity utilization in industry rose 0.8 points to 64.8%, 1.9 points beneath its lowest Great Recession point; Capacity utilization in manufacturing rose 2.2 points from April to 62.2%, 1.5 points beneath its Great Recession trough from June 2009.
Durable manufactured goods saw output rise by 3.8% last month, with significant gains in motor vehicles and parts that still left output more than 60% below February levels. Other durable goods categories’ output rose by less than 10%, including nonmetallic mineral products, aerospace and miscellaneous transportation equipment, and furniture and related products. Output of nondurable products rose 2.1%, including raises of 10% or more in textiles, apparel, printing and support, and plastics and rubber.
Respondents to the Federal Reserve Bank of Philadelphia’s June 2020 Manufacturing Business Outlook Survey, issued June 18, also indicated that manufacturing conditions in the region improved. Figures indexing general activity, new orders, shipments, and were all positive. The diffusion index for general activity went from -43.1 to 27.5 in June, its first positive rating since February; the metric measures perceived turning points in the economy. The survey covers parts of Delaware, Eastern Pennsylvania, and New Jersey.
The Empire State Reserve Bank’s Manufacturing Survey, which covers regional manufacturers in New York State, released its own data June 16. It, too, indicated stabilizing manufacturing activities following two months of sharp decline. The general business conditions index, which tracks manufacturer sentiment, climbed almost 50 points to -0.2. While 36% of respondents reported improved conditions, the survey showed about the same percentage reporting worsened conditions month-over-month.
In general, though, the Empire State report notes that companies are far more optimistic than previously, as the index for future business conditions jumped to 56.5%, reportedly its highest level in more than ten years. And, although employment levels edged slightly lower in June, the index for future employment rose to 19.0: According to the Empire State Bank, this likely indicates companies expect to increase employment in the coming months.