US: Richmond Fed Manufacturing Index

Tue Jun 26 09:00:00 CDT 2018

Consensus Consensus Range Actual Previous
Level 16 14 to 16 20 16

Manufacturing activity in the Fifth District continued to accelerate in June, with the Richmond Fed Manufacturing Index exceeding expectations by rising by 4 points from the May reading to 20. The monthly gain was buoyed by all three of the main components of the index, with shipments up 2 points to 18, the volume of new orders up 6 points to 22, and the number of employees up 6 points to 22.

Boding well for future strength was an increase in backlog of orders by 12 points to 19, the highest reading of the year. A rise of 7 points to 26 in capital expenditures also points to more robust growth ahead, though equipment and software fell by 10 points to 16 and services expenditures by 11 points to 0.

While employment grew in June, firms reported greater difficulties in finding employees with skills they need, with the available skills component falling 11 points further into contraction territory to a minus 14.

Manufacturers reported acceleration in price increases in June, especially in current price paid, where the increase reached the highest level since November 22. Nevertheless, manufacturers in the June survey expected increases to slow over the next six months to a greater degree than they did in May.

Market Consensus Before Announcement
Gains for new orders and a build for backlogs in May point to strength for the Richmond Fed's manufacturing index in June, at a consensus 16. This report has been showing less strength than other regional reports though hints of overheating are nevertheless apparent including acceleration for input prices.

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.