US: Richmond Fed Manufacturing Index

Tue Jul 25 09:00:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
Level 8 7 to 9 14 7 11

Manufacturing activity in the Fifth district expanded for the ninth consecutive month in July, with the Richmond Fed Manufacturing Index rising 3 points to 14 mostly on the back of increases in new orders and employment. Analysts did expect an upbeat report with a slight increase to 8 from June's reading of 7, but the Richmond Fed noted the entire series of the index has been revised and seasonal adjustment factors were recalculated to better reflect current economic trends.

All of the components for current conditions registered increases except for shipments, which remained unchanged at 13. New orders were up 4 points to 18, while the backlog of orders shot up 15 points from minus 4 to 11. Capacity utilization increased by 4 points to 9, and vendor lead times rose 1 point to 7.

The employment front showed dramatic improvements, with the index for the number of employees rising 5 points to 10, the average workweek increasing by 9 points to 10, while wages rose 7 points to 17.

Looking ahead, manufacturing executives remained very optimistic about the next six months. Almost all measures were in highly positive territory and increased in the month, except for vendor lead times, which remained unchanged at the June level of 7.

Manufacturing executives reported moderate growth in both prices paid and prices received. Expectations of a rise in prices paid increased but there was virtually no change in the expected growth for prices received.

Market Consensus Before Announcement
Richmond Fed's manufacturing index bounced 6 points higher in June to 7 with forecasters calling for 8 in July. This report, like other regional factory samples, has posted some very strong readings this year including the first back-to-back plus 20 showings, in March and April, since 1994.

This survey tracks business conditions in the Richmond Fed's manufacturing sector. The headline index is a composite of the new orders, shipments, and employment indexes.

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.