US: Richmond Fed Manufacturing Index

Tue Jun 23 09:00:00 CDT 2015

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The early read on June conditions in the manufacturing sector is mixed, which is actually positive compared to prior months. The Richmond Fed manufacturing index is up 5 points in June to 6 which is pretty solid for this reading. And, importantly, new orders lead the report, up 9 points to 11. Backlog accumulation is right behind, at plus 6 for a rare positive reading. Hiring is up with wages showing some pressure. Other price readings show no significant pressure. Weakness in today's report is in shipments which are flat this month, but this is far offset by the jump in new orders.

Where does the manufacturing stand right now? Readings on this month are so far mixed with this report and last week's Philly Fed report on the strong side but last week's Empire State report and this morning's PMI manufacturing index on the soft side. A look back at May in this morning's durable goods is likewise mixed with most readings soft except for capital goods which is a key group. Being mixed in sum points to no better than flat conditions in sharp contrast to housing data which are now uniformly strong.

This survey provides a comprehensive set of indicators of business conditions within the fifth region's manufacturing sector. The survey provides participants' knowledge of recent changes in manufacturing activity as well as insights into expected developments in six months. The data are released the fourth Tuesday of each month. The headline index is the composite for current month activity. It is a weighted average of the shipments (33%), new orders (40%) and employment (27%) indexes. (Federal Reserve Bank of Richmond)

Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. By tracking economic data such as the regional Fed surveys, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth so that it won't lead to inflation. These surveys give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on market behavior.