I don't routinely chart the regional manufacturing indexes, but my friend Lance Roberts posted a commentary yesterday that caught my eye: Richmond Fed - Recession Risks Increase. This particular Fed region represents Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. I hale from the Carolinas, so perhaps I should pay more attention.
I downloaded the complete data series behind yesterday's Richmond Fed manufacturing report (PDF file), which dates from November 1993. The chart below illustrates the 21st century behavior of this diffusion index.
Yesterday's decline was rather dramatic, even for this volatile series. And the trend over the past six months has been especially arresting. Outside of recessions, the only comparable drop was December 2010 - May 2011, and that six-month series appears to have been skewed by the December 2010 optimistic outlier, hence the rationale for the 3-month moving average.
How representative is this mid-Atlantic region to the larger economy? I calculated the correlation between the Richmond Fed Manufacturing Composite and the ISM PMI Composite Index, which I reported on earlier this month here. It is an impressive 0.84.
The key indicator I'll be studying as a clue for recession risk will be posted next Tuesday, July 31st. It's the Personal Income data in the next Personal Income and Outlays report from the Bureau of Economic Analysis, one of the Big Four Indicators I reported on recently. Meanwhile, today's Richmond Fed data certainly increases the tension for recession analysis.
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A Footnote On The Richmond Fed Manufacturing Composite Index
Published 07/25/2012, 12:37 AM
Updated 07/09/2023, 06:31 AM
A Footnote On The Richmond Fed Manufacturing Composite Index
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