Richmond Fed Manufacturing Composite: "Grew Mildly in June"

June 24, 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 May update shows the manufacturing composite at 3, down from 7 last month. Numbers above zero indicate expanding activity. Today's composite number was below the forecast of 6.

Because of the highly volatile nature of this index, I like to include a 3-month moving average, now at 5.7, 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 grew mildly in June, according to the most recent survey by the Federal Reserve Bank of Richmond. The volume of new orders rose slightly, while shipments softened. Manufacturing employment weakened compared to last month, while average wage growth eased and the average workweek lengthened.

Manufacturers looked for better business conditions in the next six months. Producers anticipated a higher volume of new orders and shipments. Additionally, firms anticipated greater backlogs of new orders and predicted capacity utilization would increase. Expectations were for longer vendor lead times in the six months ahead.

Survey participants also planned more hiring, along with strong growth in wages and a pickup in the average workweek in the next six months.

Prices of raw materials and finished goods rose at a slower pace in June compared to last month. However, firms expected faster growth in prices paid and prices received over the next six months than they anticipated a month ago.

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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