Manufacturing activity growth in the Fifth District slowed more than analysts expected in March, with the Richmond Fed Manufacturing Index falling sharply by 13 points from February's near record level to 15. The deceleration seen in the seventeenth consecutive monthly expansion of manufacturing in the Fifth District followed February's particularly dynamic upsurge and was driven by sizeable declines in shipments, down 16 points to 15, new orders, down 10 points to 17 and employment, where the number of employees component fell 14 points to 11.
But the deceleration was broad-based, with all but one (service expenditures, up 8 points to 18) of the business sector activity components registering declines within current conditions. Most of the largest declines were in the components driving the previous month's accelerated growth, indicating that February's activity surge was unsustainable, as shown in capacity utilization, down 19 points to 13, local business conditions, down 22 points to 7, and capital expenditures, which fell 12 points to 16.
In contrast with their assessment of current conditions, manufacturing executives became more optimistic in February in almost every aspect of business, most of all the components leading the current conditions declines. Expectations for shipments thus rose 10 points to 55, the expected volume of new orders rose 6 points to 46 and the expected number of employees component increased by 9 points to 31.
After surging to the highest level in nearly a year in February, inflation pressures increased for prices paid in March but decreased slightly for prices received. Business managers dialed down by a notch their expectations of acceleration in higher prices paid and raised their expectations for higher prices received.