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Manufacturing activity in the Fifth District remained sluggish in November. The Fifth Federal Reserve District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The composite manufacturing index remained at -14 in November. Among its components, shipments decreased from -8 to -12, new orders inched down from -17 to -19, and employment rose from -17 to -10. The vendor lead time index edged down from 6 to 4 in November, and firms continued to report declining backlogs. Companies also grew slightly more pessimistic about local business conditions, with the index remaining solidly in negative territory. The average growth rate of prices paid decreased in November, while the rate of prices received increased modestly.

Expectations for future shipments and new orders both increased further into positive territory, suggesting that firms continue to anticipate improvement in these areas. Expectations for backlogs and the outlook for future local business conditions improved, with both indicators remaining positive. Firms continue to exhibit a more cautious approach to equipment and software spending, as expectations became slightly more negative. Spending on capital expenditures also fell, remaining negative.

In November, Texas factory activity was relatively flat, but most indicators of manufacturing were in negative territory. The production index turned negative again to -0.9, after rising to 14.6 in October. The new orders index pushed further into negative territory to -11.9, indicating continued declines in demand. Meanwhile, the capacity utilization and shipments indexes both turned negative to -4.8 and -5.9, respectively.

Perceptions of business conditions were mixed in November, and the general business activity index held relatively steady at -2.7. Meanwhile, the company outlook index turned positive, improving to 5.8. The outlook uncertainty index, which has been volatile lately, dropped more than 10 points to 5.9 after a significant increase in the previous month.

Labor market indicators suggested some employment growth and steady workweeks in November. The employment index soared 10 points to 4.9, while the hours worked index rose nearly six points to 0.3, both turning positive. About 19% of firms reported hiring, while 14% noted layoffs. Moderate upward pressure on prices and wages persisted, with all indexes roughly aligned with historical averages. The wages and benefits index fell to 18.6. On the other hand, the raw materials prices index spiked more than 12 points to 28.5, while the finished goods prices index inched up to 8.8.

The outlook for future manufacturing activity remained optimistic. The future production index edged up to 44.0, a three-year high. Similarly, the future general business activity index rose slightly to 31.2, also a three-year high.

Existing home sales increased 3.4% in October and 2.9% from October 2023. Housing inventory rose to 1.37 million units, reflecting a 0.7% increase from September and a 19.1% boost from last year. The median existing home price was $407,200, up 4.0% from last year, with all four U.S. regions reporting price increases.

Single-family home sales rose 3.5% from September, with the median price increasing 4.1% from October 2023 to $412,200. Condo and co-op sales grew 2.7% in October but declined 7.3% from the previous year, with the median price up 1.6% from the prior year to $360,300.

Homes were typically on the market for 29 days in October, up from 28 days in September and 23 days in October 2023. First-time buyers made up 27% of sales, up slightly from 26% in September but down from 28% in October 2023. All-cash sales accounted for 27% of transactions in October, down from 30% in September and 29% a year ago. Meanwhile, investors or second-home buyers represented 17% of homes purchased in October, up from 16% in September and 15% a year ago. Distressed sales represented 2% of purchases in October, unchanged from the previous month and last year.

Building permits fell 0.6% in October and 7.7% over the year. Permits for single-family homes rose 0.5% in October but declined 1.8% over the year. Permits for buildings with five or more units fell 3.0% from September and plummeted 20.9% over the year.

In October, housing starts decreased 3.1% over the month and 4.0% over the year. Additionally, starts for single-family homes fell 6.9% from September but just 0.5% from October 2023. Meanwhile, starts for buildings with five or more units increased 9.8% from September but declined 12.6% over the year.

Housing completions decreased 4.4% from September but jumped 16.8% from October 2023. Single-family home completions fell 1.4% from September and 0.2% over the year. Completions for buildings with five or more units dropped 9.0% over the month but soared an incredible 61.4% from October 2023.

The Conference Board Leading Economic Index for the U.S. fell 0.4% to 99.5 in October, following a 0.3% decline in September. Over the past six months (April to October 2024), the LEI has decreased 2.2%, which is slightly worse than the 2.0% decline in the prior six months (October 2023 to April 2024). Weakness in new factory orders continued to be the most significant drag on the index.

In October, manufacturing hours worked fell by the most since December 2023, while unemployment insurance claims rose and building permits declined, partly due to the impact of hurricanes. In addition, the yield curve inversion continued to weigh on the LEI. On the bright side, the LEI stopped signaling an impending recession in October.

Meanwhile, the Coincident Economic Index was unchanged for a second consecutive month at 112.8 but has increased 0.8% over the past six months. On the other hand, the Lagging Economic Index inched down 0.1% in October to 118.7 and has contracted 0.8% over the past six months, which partially reversed the 1.2% growth over the prior six-month period (October 2023 to April 2024).

The S&P Global Flash U.S. Manufacturing PMI rose slightly from 48.5 in October to 48.8 in November, signaling a deterioration in business conditions for the fifth consecutive month but at the slowest rate since July. Although production fell sharply, all other PMI components moved higher. The rate of loss of new orders eased, and employment rose modestly for the first time in four months.

The improvement in sentiment was notable especially in the manufacturing sector, where optimism struck a 31-month high, adding to suggestions that activity may improve further in the coming months. Respondents also often cited a more business friendly incoming administration as beneficial to the outlook, notably in terms of looser regulation and protection measures, the latter particularly helping boost sentiment in manufacturing. On the other hand, suppliers’ delivery times lengthened to the greatest extent in 25 months, often linked to increased purchasing of imported inputs ahead of potential tariffs.

Manufacturing activity fell slightly in the Tenth District in November, while expectations for future activity rose. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico. The month-over-month decline in activity was driven primarily by nondurable goods falling modestly, particularly paper and petroleum products, while durable goods activity was flat. All month-over-month indexes were mixed, with half slightly negative and half slightly positive.

Both production and new orders fell slightly, while employment stayed steady. Backlog of orders continues to have the lowest reading at -14. The year-over-year composite index for factory activity fell, as employment, supplier delivery time and raw material inventories all fell further. On the other hand, new orders and capital expenditures improved year-over-year but new orders remained negative. The future composite index increased slightly, driven by high expectations for future production and new orders. Employment and capital expenditures are also expected to grow in the next six months.

This month, survey respondents were asked about employment expectations over the next year. About half of firms (52%) expect to leave employment levels unchanged over the next year, while 37% plan to increase employment and 11% expect to decrease. Firms were also asked if they’ve been raising starting wages for new hires. About a quarter of firms (23%) have raised new hires’ wages for most job categories, while 35% have for only select job categories. About another quarter (24%) have not raised new hires’ wages, while 18% of firms surveyed are not actively hiring.

In November, Philadelphia’s regional manufacturing activity softened overall. The index for current general business activity turned negative, falling from 10.3 to -5.5. More than 17% of firms reported increased activity this month, while slightly more than 23% reported decreases and more than 58% reported no change. The indexes for new orders and shipments also decreased but stayed positive. On the other hand, firms reported an increase in employment after reporting mostly steady job gains last month, with the employment index returning to positive territory at 8.6.

Both price indexes edged down but continue to indicate overall increases in prices. The prices paid index declined from 29.7 to 26.6 but remains at an elevated level that reflects the notable portion of firms experiencing higher input costs. The prices received index also fell and remained significantly lower than the prices paid index at 14.3, exhibiting how manufacturers are eating a sizable portion of those higher costs paid.

Looking ahead, most future indicators increased. The index for future general business activity rose markedly to 56.6, indicating growing optimism among firms. A higher proportion of firms still expected increases in activity. Additionally, the future new orders, shipments, capital expenditures and employment indexes also rose. On a more negative note, the future prices paid index increased markedly, but the future prices received rose.

Manufacturers have one last opportunity to express their opinions to the new administration and Congress before they take office: the NAM’s Q4 2024 Manufacturers’ Outlook Survey, which is open until Dec. 4.

“The Outlook Survey is the NAM’s principal means of finding out what manufacturers are experiencing and thinking, and one of the industry’s most potent advocacy tools,” the NAM’s new chief economist, Victoria Bloom, said. Bloom walked us through the survey’s impressive history of influencing policy debates and its particular importance today. 

What it is: The NAM has run its Outlook Survey every quarter for more than 25 years, capturing manufacturers’ opinions on enormous policy shifts and seismic changes in the economy, including the 2017 tax reform and the COVID-19 shutdowns, Bloom said.

• All manufacturers in the NAM’s membership are eligible to take it, making it an unparalleled sampling of industry opinion. Respondents include companies of all sizes and sectors, located across the entire United States.
• The survey is in the field for about two and a half weeks and takes only minutes to complete—you can even do it on your phone. 

Why it matters: Not only will the current survey be the last word from manufacturers before the White House and Congress change hands, but it will help provide clarity on where manufacturers stand in this period of economic uncertainty. It’s crucial for manufacturers to speak up about what they are seeing, Bloom emphasized.

• “We’ve had a lot of muddied economic data lately due to worker strikes and hurricanes, as reflected in the monthly jobs report and industrial production report,” she said. “This has made it more difficult to determine how the industry is actually doing, which is why we need manufacturers to tell us directly.”

Who’s the audience: The NAM’s survey is read—and publicized—by the highest levels of the administration and Congress. To take one example, it had a profound impact during the years following tax reform:

• President Trump cited the Outlook Survey in a 2019 address at the Lima Army Tank Plant, noting manufacturers’ record levels of optimism following the passage of the Tax Cuts and Jobs Act.
• John Thune (R-SD), the incoming Senate majority leader, cited the survey in a 2018 press release, also on the benefits of tax reform.
• Then-Senate Majority Leader Mitch McConnell (R-KY) cited the survey on the Senate floor in 2018.

What’s in it: The survey asks a few standard questions, including the big one: are manufacturers feeling positive or negative about their company’s outlook?

• The survey also asks manufacturers about the biggest challenges they’re facing. In the Q3 2024 survey, the top concerns included a weaker domestic economy, followed by rising health care costs.
• These standard questions are often followed by questions that pertain to specific policy developments, like the looming expiration of critical tax provisions in 2025, or manufacturers’ responses to the COVID-19 pandemic.

The data: The survey’s questions often reveal facts about manufacturers that appear nowhere else.

• For example, Bloom told us, in Q3 2024, respondents as a whole felt most concerned by the weakening state of the economy. However, small and medium-sized manufacturers, when separated out, cited rising health care costs as their top concern.
• “The survey told us rising health care costs have been a more significant challenge for SMMs, which is an important data point for the NAM’s advocacy work,” Bloom said.
• During the early months of the COVID-19 pandemic, the survey was a particularly valuable tool, she added. Amid the chaos of the lockdowns, the NAM was able to survey its members to determine what share of manufacturers were continuing operations in whole, in part or not at all.

The bottom line: “As we will soon have a new administration and a new Congress, manufacturers must speak up—and keep speaking up—about their challenges and concerns,” Bloom concluded.

• “Future Outlook Surveys will cover new developments as they arise, and of course manufacturers will be faced with new challenges and policy threats. If they haven’t already, NAM members should make survey-taking a habit, for the health of our industry.”

If you ask the leaders at Hyzon what kind of company it is, the answer might surprise you. The business, which manufactures “high-performance hydrogen fuel cell systems,” doesn’t consider itself just a manufacturer.

Making things possible: “We are a clean technology company that makes it possible to provide emissions-free power to some of the most difficult applications out there,” said Chief Operating Officer Dr. Bappaditya Banerjee. “It just so happens we are starting with Class 8 and refuse trucks.”

• In September, the Bolingbrook, Illinois–based firm announced the start of production of its single-stack, 200-kilowatt fuel cell systems to power those heavy-duty hydrogen fuel cell trucks. Hyzon is the only U.S. producer of the single-stack 200-kilowatt fuel cell.
• The new system is an upgrade from the 110-kilowatt fuel cell assemblies that Hyzon used in its first-generation vehicles.
• “If we were to put together two 110-kilowatt fuel cells to get to 200 kilowatts, the single-stack system would be 30% lighter than two110-kilowatt systems, as well as 25% cheaper to produce,” Banerjee said.

A differentiator: The company aimed to scale up the power of the engine without also significantly scaling up the size—no easy task. So Hyzon developed a proprietary solution: its hybrid bi-polar plate technology.

• “Most [fuel cell] stacks are either metal or carbon, but ours are hybrid,” Banerjee explained. “By hybrid, we mean that the cathode—where the oxygen comes into the system—is carbon, while the anode side is metal. The carbon side is more corrosion resistant while the metal side is strong, rigid and easier to manufacture, which allows a compact design.”
• “It’s the structure of the plates and the unique 200-kilowatt, single-stack design that allowed us to make it small enough to fit under the hood of a truck,” added Hyzon Vice President of Global Engineering Ravi Desai. “What does this is the design combination of our Membrane Electrode Assembly, the bi-polar plates and the compact balance of plant,” he said, referring to the network of pipes, hoses and fittings necessary for the fuel cell stack to work.

Uses and range: Hyzon offers two different emissions-free, heavy-duty vehicle types for industrial and commercial use, including a refuse collection truck. The models boast driving ranges comparable to those of diesel-powered trucks.

• The Heavy Duty Class 8 Fuel Cell trucks can typically go 350 miles from full storage tanks to empty, while the Fuel Cell garbage trucks can do a full day of work (at least 1,200 trash bin lifts and 125 miles of driving range) on a full tank.
• The trucks take about 15 to 20 minutes to refuel with a fast-fill dispenser at 350 bar, the pressure of the hydrogen gas needed to fill the trucks.

A challenge: In the U.S., the only publicly available hydrogen fuel refilling stations are in California, restricting widespread adoption for now. Meanwhile, the cost of filling up can be high.

• To support the construction of stations around the country and lower prices, the Biden administration announced $7 billion in funding last year for regional clean hydrogen “hubs.”
• In addition, the Inflation Reduction Act created the 45V hydrogen production tax credit, designed to help jumpstart scalable and sustainable domestic hydrogen fuel production.
• The credit is not yet available to companies, however, as the administration works to issue final regulatory guidance. The NAM has worked tirelessly to ensure this guidance is as broad, flexible and fair as possible.

Good for everyone: Hyzon doesn’t want to be the only player in the hydrogen ecosystem. On the contrary, it welcomes competition for the good of consumers and the industry.

• “The number of people who have been able to provide something useful [in transportation] using hydrogen is so limited that the more of us who succeed, the more it allows for hydrogen to become a normal part of our infrastructure,” said Banerjee. “A rising tide lifts all boats.”