US manufacturers ‘uniformly optimistic’ about 2024 activity – Fed Beige Book

SAO PAULO (ICIS)–US manufacturers were “uniformly optimistic” in March about the prospects for the next 12 months on expected higher sales, the country’s Federal Reserve (Fed) Beige Book said on Wednesday.

The Beige Book is a summary of US economic activity during the past six weeks among the 12 districts, one of which is the Federal Reserve Bank of Dallas. That bank includes all of Texas and northern Louisiana, the home of many petrochemical plants and refineries.

The Beige Book published on Wednesday contains survey responses collected in the six week to 8 April.

US manufacturing activity was in the doldrums in 2023 and beginning of 2024, but the manufacturing PMI index for March showed activity expanding for the first time in 17 months.

Earlier this week, official data from the Fed showed manufacturing output expanding 0.5% in March.

Increased recent demand may have been one of the reasons for manufacturers to feel reasonably optimistic for the months ahead.

“Contacts were uniformly optimistic for the remainder of 2024, projecting steady to moderately higher sales moving forward; in one case, however, that still meant that total sales in 2024 would fall short of their 2023 levels,” said the Fed.

“The positive forecasts were based largely on firms’ own recent demand trends, although one contact cited the prospects of productivity gains from AI and expected cuts in the federal funds rate as additional sources of optimism.”

For the six weeks covered in the report, overall US manufacturing revenues were practically unchanged, with half of respondents reporting moderate gains in sales over the cycle and the other half experiencing moderate losses.

In the Dallas district – the 11th District in the Fed’s terminology – the economy expanded modestly, propped by services and housing.

However, the district’s manufacturing output “declined slightly”, with job creation slowing.

“Employment growth slowed as wages, input costs, and selling prices grew at a moderate pace. Overall, Texas firms noted an uptick in uncertainty,” said the Fed.

OVERALL, STEADY
The overall US economic continued expanding in the six weeks to 8 April, with 10 out of 12 districts experiencing “either slight or modest” economic growth, up from eight in the previous report.

Some downside economic risks remain, however, with labor shortages still being mentioned, although with the expectation that over the course of the next 12 months a more balance labor market could emerge.

“On balance, contacts expected that labor demand and supply would remain relatively stable, with modest further job gains and continued moderation of wage growth back to pre-pandemic levels,” said the Fed.

Price increases were practically unchanged from the last report, with logistics disruptions in the Red Sea and the collapse of Baltimore’s Key Bridge not leading yet to a significant increase in costs, despite some shipping delays.

“Another frequent comment was that firms’ ability to pass cost increases on to consumers had weakened considerably in recent months, resulting in smaller profit margins. Inflation also caused strain at nonprofit entities, resulting in service reductions in some cases,” concluded the Fed.

“On balance, contacts expected that inflation would hold steady at a slow pace moving forward. At the same time, contacts in a few districts – mostly manufacturers – perceived upside risks to near-term inflation in both input prices and output prices.”

Thumbnail image shows an ExxonMobil plant in Beaumont, Texas. Photo courtesy of ExxonMobil