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posted on 28 June 2016

Richmond Fed Manufacturing Survey Remains In Contraction In June 2016.

Of the five regional Federal Reserve surveys released to date, three are in expansion and two are in contraction.

There were no market expectations from Bloomberg. The actual survey value was -7 [note that values above zero represent expansion].

Fifth District manufacturing activity weakened in June, according to the most recent survey by the Federal Reserve Bank of Richmond. New orders and shipments declined this month, while backlogs decreased further compared to last month. Manufacturing employment softened, while firms continued to increase wages. Prices of raw materials rose somewhat more slowly this month and finished goods prices rose slightly faster in June, compared to last month.

Manufacturers' positive expectations faded in June. Producers anticipated mild growth in shipments and in the volume of new orders in the next six months. Compared to last month's outlook, backlogs and capacity utilization were expected to level off. Firms looked for vendor lead times to lengthen slightly during the six months ahead.

Looking ahead, more survey participants expected slower growth in the number of employees and a shorter average workweek. However, an increasing number of firms anticipated wage increases. Producers expected faster growth in prices paid and received.

Current Activity

Overall, manufacturing conditions weakened in June. The composite index for manufacturing dropped to a reading of −7. The indicators for shipments and order backlogs remained in negative territory this month. Those indexes ended at readings of −3 and −17, respectively. The volume of new orders dropped sharply in June; the index lost 14 points, ending at −14. Additionally, the third component of the composite index, the employment index, flattened this month. That indicator moved down five points to end −1.

The capacity utilization index slipped four points this month, pulling the index down to a reading of −10. Vendor lead time was unchanged compared to last month, with that indicator moving down five points to end at 1. Finished goods inventories rose across more firms compared to a month ago; that index gained eight points, ending at a reading of 27. Growth in raw materials inventories broadened at a slightly faster pace in June, with that indicator adding one point to end the survey period at 26.

Summary of all Federal Reserve Districts Manufacturing:

Richmond Fed (hyperlink to reports):

z richmond_man.PNG

Kansas Fed (hyperlink to reports):

z kansas_man.PNG

Dallas Fed (hyperlink to reports):

z dallas_man.PNG

Philly Fed (hyperlink to reports):

z philly fed1.PNG

New York Fed (hyperlink to reports):

z empire1.PNG

Federal Reserve Industrial Production - Actual Data (hyperlink to report):

Holding this and other survey's Econintersect follows accountable for their predictions, the following graph compares the hard data from Industrial Products manufacturing subindex (dark blue bar) and US Census manufacturing shipments (lighter blue bar) to the Richmond Fed survey (darkest bar).

Comparing Surveys to Hard Data:

z survey1.png

In the above graphic, hard data is the long bars, and surveys are the short bars. The arrows on the left side are the key to growth or contraction.

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