US: Richmond Fed Manufacturing Index

Tue Feb 27 09:00:00 CST 2018

Consensus Consensus Range Actual Previous
Level 16 15 to 22 28 14

After slower growth in the previous two months, manufacturing activity in the Fifth District showed renewed robust growth in February, with the Richmond Fed Manufacturing Index jumping from January's 14 to 28, the second highest value on record. Far surpassing consensus analysts' expectations calling for a modest increase of 2 points, the sharp acceleration in the sixteenth consecutive monthly expansion of manufacturing in the Fifth District was driven by increases in shipments, up 16 points to 31, new orders, up 11 points to 27, and the number of employees, up 15 points to 25.

But almost all of the components making up the index indicated a vigorous pickup in manufacturing activity, including the backlog of orders, up 13 points to 18, capacity utilization, up 19 points to 32, and capital expenditures, up 10 points to 28.

On the employment front, in addition to the increase in the number of employees, the average workweek in Fifth District manufacturing companies lengthened as well, with the component up 26 points to 28. But wages showed only a point improvement to 23 and available skills was down 7 points to a minus 17, indicating greater difficulty in finding skilled workers.

A sizeable pickup in inflation for both prices paid and prices received was reported, with each rising at the highest rate since April 2017. Businesses expect prices to continue to rise at the accelerated pace in the near future.

The acceleration in the growth of business activity as well as prices seen in today's survey report will be added to the evidence calling for further tightening by the Fed.

Market Consensus Before Announcement
The Richmond Fed manufacturing index has cooled the last two reports but remains strong, at 14 in January with forecasters calling for 16 in February.

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.