Manufacturing businesses in the U.S. central Atlantic region reported worsening local business conditions and rising cost inflation as the sector’s expansion continued in April, results from a survey by the Federal Reserve Bank of Richmond released Tuesday showed.
The Fifth District Survey of Manufacturing Activity showed that businesses say the prices paid for materials rose 11.83 percent over the preceding 12-months, up from 11.05 percent in March. But manufacturers do expect easing of price pressure in the future, likely reflecting the Federal Reserve’s recent hawkishness. Expected cost inflation over the next 12-months fell to 6.09 percent from 6.56 percent.
Although inflationary pressures worsened on the cost side, manufacturers reported slightly smaller hikes in prices of their finished goods. Prices rose 8.93 percent over the last 12-months, down a bit from 9.16 percent in March. Expectations for price hikes also eased. In January, this gauge hit its all-time high of 11.27 percent.
Taken together, the prices indices suggest that businesses are finding it harder to pass costs on to customers. Indeed, the index of new orders fell to 7 from 10, which might indicate some demand destruction from high prices.
The survey covers manufacturing business in the Fed’s Fifth District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.
The index of wages paid by businesses increased from 37 in March to 41. Expectations for wage increases also grew.
The composite manufacturing index stood at 14 in April compared to 13 in March, indicating that the sector continued to expand. This was above economist expectations.
Order backlogs continued to increase in April. Vendor lead times remained high and are expected to continue increasing over the next six months.
The index for finished goods and raw materials inventories remained low, and firms expected that to persist for the foreseeable future.
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