older ones in the Fith District, the manuacturingmix was becoming more sensitive to cyclical down-turns. During this time, consumer durables, thesubsector that is typically most strongly aectedby recessions, grew substantially as a percentage o the District’s manuacturing base, while consumernondurables, a subsector that is typically moreresistant to recessions, declined dramatically as apercentage o the District’s manuacturing base.Consumer durables, such as the power tools madein Maryland, tend to cost more and last longer thanconsumer nondurables, such as the cookies baked inVirginia. During a recession, the typical consumer ismore likely to satisy his sweet tooth than expand hishome workshop.
I productivity were rising, which might be expectedin the transition rom older to newer industries, thenoutput could increase despite employment declines.Yet gross state product data show that the District’smanuacturing output grew more slowly than thenation’s during the past decade. However, gross stateproduct data oer limited observations o cyclicalbehavior because they are calculated only annuallyand thus obscure the monthly changes by whichrecessions are more oten measured. To clariy the
underlying cyclical patterns, the Federal ReserveBank o Richmond uses a monthly composite di-usion index derived rom the Bank’s Fith DistrictSurvey o Manuacturing Activity. The index is basedon weighted averages o survey responses aboutincreases and decreases in employment, shipments,and new orders, making it a viable proxy or monthlyoutput. This index, decomposed into our majorsubsectors, reveals richer insights than gross stateproduct data into the impact—both timing and rela-tive magnitude—o the recession on the District’smanuacturing sector.Comparisons o the composite index to similarnational and regional measures indicate that mosto the District’s manuacturers elt the recession’seects much sooner than their national counter-parts. Indeed, the District’s manuacturing sectorwas beginning a steep descent while the nationalmanuacturing sector still was edging upward.
TheDistrict’s composite index began signaling a declinein manuacturing activity in mid-2006—a year and ahal beore the recession ocially started.In addition to experiencing the early onset o con-traction, each manuacturing subsector behavedsomewhat dierently beore, during, and ater
Figure 2: Industrial Durables Subsector IndexCompared to Composite Manuacturing IndexFigure 3: Industrial Nondurables Subsector IndexCompared to Composite Manuacturing Index
Composite Manufacturing IndexComposite Manufacturing IndexIndustrial Durables IndexIndustrial Nondurables Index
M a y - 1 1 M a y - 1 1 M a y - 1 0 M a y - 1 0 M a y - 0 9 M a y - 0 9 M a y - 0 8 M a y - 0 8 M a y - 0 7 M a y - 0 7 M a y - 0 6 M a y - 0 6 M a y - 0 5 M a y - 0 5 M a y - 0 4 M a y - 0 4 M a y - 0 3 M a y - 0 3 M a y - 0 2 M a y - 0 2
Source: Fith District Survey o Manuacturing Activity, Federal ReserveBank o RichmondNote: Monthly data have been converted to three-month, centeredmoving averages to more clearly capture underlying cyclical patterns.Gray area denotes recession.Source: Fith District Survey o Manuacturing Activity, Federal ReserveBank o RichmondNote: Monthly data have been converted to three-month, centeredmoving averages to more clearly capture underlying cyclical patterns.Gray area denotes recession.