- The Washington Times - Tuesday, February 11, 2003

RICHMOND, Va., Feb. 11 (UPI) — The Federal Reserve Bank of Richmond said Tuesday after exhibiting modest signs of expansion over the past three months, manufacturing activity in the fifth district, or south-eastern portion of the nation, grew in January.

The Fed’s seasonally adjusted shipments index jumped to 18 from minus 3 in December.

The fifth district, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia, produces approximately 9 percent of the nation’s gross domestic product.

The regional Fed said shipments and new orders rose sharply and capacity utilization increased for the first time in seven months.

In addition, backlogs and vendor-lead time moved into positive territory. On a less robust note, factory inventories remained above desired levels, though considerably less so than last month.

The Richmond Fed said on the job front, manufacturers reported more modest declines in worker numbers, while the average workweek lengthened and wages advanced at a slightly slower pace.

Manufacturers’ expectations remained upbeat in January as firms generally anticipated ongoing growth in shipments, new orders and capacity utilization in the coming six months.

Price increases at manufacturing plants continued to be modest in January and compared to December, raw materials prices grew at a slightly slower pace, while finished goods prices grew at a slightly quicker rate.

The Fed said the new orders index also rose sharply, surging to 26 from 4. The orders backlog reversed its downward trend, improving to 2 from minus 8.

Capacity utilization turned positive as the index rose to 19 from minus 12 in December and vendor lead-time, inched up into positive territory to end at 2.

The Fed said with shipments and new orders growth rising, manufacturers made some progress in trimming their stocks; both finished goods and raw materials inventories grew somewhat slower in January, though they remained above desired levels.

The finished goods index moved down to 19 and the raw materials index fell to 9, below its three-month average of 15.

Labor conditions in the goods producing sector exhibited more moderate weakness in January. The employment index improved to minus 12 from minus 14 and the average workweek index posted a reading of 4 — its first positive reading since July 2002.

Wages grew slightly slower as the index settled at 9 down from 11 during the previous month.

Looking ahead for the next six months, the Fed said respondents looked for prices of raw materials and finished goods to grow at slightly slower rates.

The Fed also said respondents remained confident about their business prospects for the coming six months. The expected shipments index inched up to 46 from 42, while the expected orders index dropped to 45 from 53. In addition, the expected orders backlogs index fell to 22 from 27 and the capacity utilization index improved to 39 from 38.

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