The latest batch of economic indicator reports released in September offer a complex picture of the industry’s current status. Over the month we saw significant changes in manufacturing output, labor, industrial demand and more. Meanwhile, regional surveys unveiled varying economic conditions across different parts of the nation. Wondering what the latest data tells us? Get our latest report on the vital economic metrics shaping the U.S. manufacturing landscape in September!
Executive Summary: Economic Indicators for Manufacturers in September
• U.S. manufacturing output held steady in August, inching up 0.1% over July, with strong gains seen in the aerospace industry, while the auto industry saw output decline.
• U.S. manufacturers added 16,000 jobs in August, rebounding from a 2,000-job loss in July, led by the chemical industry.
• While manufacturing activity contracted for a tenth consecutive month in August, the rate of decline continued to slow.
• The number of unfilled manufacturing jobs in the U.S. held steady at 467,000. This is sharply lower than the nearly one million job openings reported this time last year.
• Regional surveys were mixed, with activity in the New York rebounding into expansion and strong growth recorded in Texas, but contraction recorded for manufacturing activity in many other areas of the country.
Manufacturing Output & Capacity Utilization Hold Steady
Manufacturing output was little changed in August, inching up just 0.1%, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released September 15th. This follows a stronger 1% increase in output reported for the sector in July. Meanwhile, the index for mining increased 1.4% and the index for utilities jumped 0.9%. Overall, industrial production advanced a half percent in August.
Meanwhile, manufacturing capacity utilization held steady at 77.9% in August --0.3% below its long-run average.
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The U.S. aerospace industry led manufacturing production gains in August, with the sector’s output up 3.3%. This was followed by machinery with an increase of 2%, primary metals, which climbed 1.6%, and miscellaneous manufacturing, which saw a 1.5% increase. Meanwhile, furniture and printing each advanced 1.3%.
Output losses were largely led by the automotive industry, which sank 5% in August. Additional industries that suffered output losses included apparel and leather, down 3.5% and textiles, down 2.4%.
Hiring in the U.S. Manufacturing Sector Rebounds
Following a 2,000-job loss in July, manufacturing employment in the United States increased by 16,000 jobs in July, according to the latest report from the U.S. Bureau of Labor Statistics, released September 1st. Meanwhile, the U.S. economy added 187,000 jobs overall in August, and the unemployment rate increased to 3.8%.
Job gains in August were led by durable goods, which added 12,000 jobs, while non-durable goods gained 4,000.
Industries adding jobs in August included chemicals, which gained 3,800 jobs, fabricated metals, which gained 4,600, electrical equipment, which gained 3,700, and machinery, up 3,500. Wood products, food manufacturing, textile mills, and petroleum products all saw modest gains in employment.
Job losses were seen in plastics and rubber, furniture, and computer & electronic product manufacturing.
U.S. manufacturers are still struggling to hire, although the overall number of job openings in manufacturing has declined. The Labor Department recorded 467,000 unfilled positions for the sector in August 2023, compared to nearly a million open positions reported a year ago.
U.S. Manufacturing Activity Improves Marginally
Meanwhile, U.S. manufacturing activity continued to contract for the tenth consecutive month in August, marking the longest period of contraction since the 2008-2009 recession. However, there are signs of a slower rate of decline as the Institute for Supply Management (ISM) reported a 1.2% increase in its manufacturing activity index, bringing it to 47.6%. This suggests that while the sector is still in contraction, the pace of decline is moderating. Demand decreased at a slightly faster rate in August, but there were notable improvements in output and employment, with the Production Index rising by 1.7% and the Employment Index increasing by 4.1%. These positive indicators hint at potential improvements in the manufacturing sector in the coming months.
Despite the overall contraction, there were some bright spots in the manufacturing industry. Supplier deliveries slowed, indicating improving economic conditions, while inventories decreased at a slower rate. Export orders and imports both remained in contraction, but there were marginal improvements in their rates of decline. Prices in the manufacturing sector increased, reflecting rising costs.
Additionally, while the backlog of orders continued to contract, the rate of contraction slowed down. Overall, the report suggests a cautiously optimistic outlook for U.S. manufacturing, with some industries showing signs of growth in August compared to the previous month.
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Regional Surveys Mixed
New York Manufacturing Survey: The latest Empire State Manufacturing Survey finds business activity in New York State picked up, with the general business index rebounding from contraction, climbing from -19.1 in August to 1.9 in September. New orders and shipments increased, while delivery times and inventories remained unchanged or decreased. Employment levels and the average workweek also declined slightly.
Input price increases were similar to last month, while selling price increases picked up. The respondents were more optimistic about the future business conditions, with higher indexes for expected new orders, shipments, employment, prices, and capital spending.
Philadelphia Region Manufacturing Survey: The September Manufacturing Business Outlook Survey conducted by the Federal Reserve Bank of Philadelphia shows that manufacturing activity in the region declined overall. The diffusion index for current general activity returned to negative territory, falling from 12.0 in August to -13.5 in September. More than 29% of the firms reported decreases, exceeding the 16% reporting increases. Meanwhile, the indicators for new orders and shipments also declined. On balance, firms continued to report a decline in employment and also reported an overall increase in prices, with the prices paid diffusion index rising 5 points to 25.7. Nearly 30% of the firms expect an increase in activity over the next six months, exceeding the 19% that expect a decrease; 45% expect no change.
Richmond Fed Manufacturing Survey: The Federal Reserve Bank of Richmond released its monthly survey of manufacturing activity in the Fifth District, which covers Maryland, Virginia, North Carolina, South Carolina, and most of West Virginia. The survey showed that the region’s manufacturing sector remained weak in August, as the composite index improved slightly from −9 to −7, but still indicated contraction. The indexes for shipments and new orders also increased, but remained negative, while the index for employment turned negative for the first time since April 2020. The survey respondents reported lower demand, higher costs, and shortages of materials and labor. They also expressed pessimism about the outlook for the next six months.
Kansas City Manufacturing Survey: Factory activity in the 10th district (encompassing Kansas, Colorado, Nebraska, Oklahoma, Wyoming, northern New Mexico and Western Missouri) finds the sector remained stagnant in August, as the composite index stayed at 0, indicating no change from July. The survey respondents reported declining finished product prices, increasing raw materials prices, and shortages of materials and labor. They also expected higher output prices in the next six months.
The survey covers five states in the Tenth District: Maryland, Virginia, North Carolina, South Carolina, and most of West Virginia.
Texas Manufacturing Outlook Survey: According to the Texas Manufacturing Outlook Survey, Texas factory activity resumed growth in September after a slowdown in August, with the production index rebounding to 7.9, the highest of the year. Other indicators of manufacturing activity, such as new orders, capacity utilization, and shipments, also improved this month, though some remained negative. However, perceptions of broader business conditions continued to worsen in September, with the general business activity and company outlook indexes remaining largely unchanged at -18.1 and -17.5, respectively.
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