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posted on 27 December 2016

Richmond Fed Manufacturing Survey Improves In December 2016.

Of the four regional Federal Reserve surveys released to date, all are in expansion.

Analyst Opinion of Richmond Manufacturing

For the second month, the regional Fed surveys seem to be saying uniformly that growth is expanding. The Richmond Fed subcategories were strong.

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

Fifth District manufacturing activity expanded in December. The volume of new orders picked up compared to last month and shipments increased. Manufacturing employment softened, while wage increases were more widespread across firms. Prices of raw materials rose more quickly in December, while prices of finished goods rose at a somewhat slower rate.

Manufacturers were optimistic about future business conditions. Firms expected robust growth in shipments and in the volume of new orders. Additionally, survey participants looked for backlogs to build more quickly in the months ahead and anticipated increased capacity utilization. Expectations were for slightly longer vendor lead times.

Producers anticipated an increase in hiring along with broader wage gains during the next six months, while they planned for longer workweeks. For the six months ahead, producers expected faster growth in prices paid and prices received.

Current Activity

Overall manufacturing conditions strengthened this month. The composite index for manufacturing moved to a reading of eight from last month's reading of 4. The index for shipments advanced 11 points to end at 12, and the new orders indicator added five points also ending at a reading of 12. Manufacturing employment softened this month; the December index settled at −1.

Backlogs rose at a faster pace this month; the index jumped up 20 points, ending at 8. Additionally, capacity utilization grew at a faster pace, moving the index up 11 points to a reading of 10. Vendor lead time lengthened this month, moving the index up five points to 9. More firms reported a building up of finished goods inventories in December; however, the indicator ended seven points lower than a month ago at 11. The raw materials inventories index added two points to end at 25.

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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