Richmond Fed Manufacturing Composite: "Continued to Grow at a Moderate Pace in September"

September 23, 2014

by Doug Short

As a resident of the Fifth District, this is a regional manufacturing index I pay close attention to. The Fifth District includes Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The Federal Reserve Bank of Richmond is the region's connection to the nation's Central Bank.

The complete data series behind the latest Richmond Fed manufacturing report (available here) dates from November 1993. The chart below illustrates the 21st century behavior of the diffusion index that summarizes the individual components.

The September update shows the manufacturing composite at 14, up from 12 last month. Numbers above zero indicate expanding activity. Today's composite number was above the forecast of 10.

Because of the highly volatile nature of this index, I like to include a 3-month moving average, now at 11.0, to facilitate the identification of trends.

Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.

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Here is the latest Richmond Fed manufacturing overview.

Fifth District manufacturing activity continued to grow at a moderate pace in September, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders picked up this month. Manufacturing employment also strengthened this month, while average wages rose at a slower pace and the average workweek lengthened.

Manufacturers remained optimistic about future business conditions. Survey participants expected faster growth in shipments and in the volume of new orders in the six months ahead. Producers looked for increased capacity utilization and anticipated rising backlogs. Expectations were for longer vendor lead times.

Survey participants anticipated steady growth in the number of employees and the average workweek during the next six months. Additionally, they expected faster growth in wages.

Prices of raw materials and finished goods rose at faster pace in September compared to last month. For the six months ahead, manufacturers expected slower growth in prices paid, and anticipated faster growth in prices received.

Here is a somewhat closer look at the index since the turn of the century.

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Is today's Richmond composite a clue of what to expect in the next PMI composite? We'll find out when the next Manufacturing ISM Report on Business is released next week.

Because of the high volatility of this series, we should take the data for any individual month with the proverbial grain of salt.

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