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posted on 23 August 2016

Richmond Fed Manufacturing Survey Returns To Contraction In August 2016.

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

There were no market expectations from Bloomberg. The actual survey value was -11 [note that values above zero represent expansion].

Fifth District manufacturing activity declined in August, according to the most recent survey by the Federal Reserve Bank of Richmond. New orders and shipments decreased this month, while backlogs fell. Hiring increases in the sector expanded modestly across firms, and wage increases were more widespread. Raw materials prices rose at a somewhat faster pace in August, while prices of finished goods rose at a slightly slower pace.

Looking ahead six months, producers anticipated more robust business conditions. Manufacturers expected strong growth in shipments and in the volume of new orders. Survey participants looked for backlogs to rise, and expected longer vendor lead times. Expectations were for increased capacity utilization during the next six months.

Hiring expectations across firms were strong for the months ahead, and producers anticipated future wage increases. Firms expected little change in prices paid, however anticipated somewhat faster growth in prices received in the next six months.

Current Activity

Overall, manufacturing activity declined in August, with the composite index dropping to a reading of −11, following last month's reading of 10. The indicators for shipments and new orders decreased sharply this month. The index for shipments lost 21 points, ending at a reading of −14, while the index for new orders fell 35 points to −20. In addition, the index for order backlogs fell to a reading of −21, following last month's reading of 1. In contrast, the manufacturing employment index changed little from last month, maintaining a positive reading. That indicator gained one point to end at 7.

Capacity utilization weakened in August, the index lost 22 points to end at a reading of −19. Additionally, the vendor lead time indicator moved down five points to end at 5. Finished goods inventories rose across more firms compared to a month ago, that index moved up nine points, ending at a reading of 24. Growth in raw materials inventories continued in August, with that index adding four points to end the survey period at 27.

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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