US: Richmond Fed Manufacturing Index


Tue Apr 26 09:00:00 CDT 2016

Consensus Consensus Range Actual Previous
Level 12 10 to 14 14 22

Highlights
Advance indications are mixed for the April manufacturing sector but the Richmond Fed is pointing to strength. Richmond's index did slow to 14 in April but follows an outsized 22 in March when the index posted its biggest one-month jump ever in the 23-year history of the report. New orders are very strong, at 18 but again down from 24 in March. And backlog orders are exceptionally strong, at 11 for a 10 point gain from March. Employment is solid and price data are showing some life, at least for inputs. The factory sector in March was mixed, evidenced by today's durable goods report. But the outlook for April is still open with this report and Empire State showing strength but not the Dallas Fed nor the national PMI flash. Still, strength tied to the lower dollar and to higher energy prices are very likely to give an increasing boost to the sector.

Market Consensus Before Announcement
The Richmond Fed's manufacturing index, which like other regional Fed surveys, had been in a long run of deep contraction, that is until March when it bolted to plus 22 from February's minus 4 for the greatest month-to-month surge in the report's 23-year history. New orders, perhaps getting a boost from exports and energy demand, surged in March which is a strongly positive signal for future activity. Econoday's consensus is calling for a plus 12 reading for April, down 10 points from March but still very solid.

Definition
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)

Description
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.