Richmond Fed: Manufacturing Flat In September

As a resident of the Fifth District, this is a regional manufacturing index I pay close attention to. The Fifth District includes Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The Federal Reserve Bank of Richmond is the region's connection to the nation's Central Bank.

The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993. The chart below illustrates the 21st-century behavior of the diffusion index that summarizes the individual components.

Today the manufacturing composite declined sharply from last month's interim high of 14. Investing.com had forecast an increase to 17. Because of the highly volatile nature of this index, I like to include a 3-month moving average to facilitate the identification of trends, now at 1.0, which is close to no growth.

Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.

Here is the latest Richmond Fed manufacturing overview.

Fifth District manufacturing activity was little changed in September, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments, capacity utilization, and vendor lead time flattened, while the volume of new orders slowed. The backlog of new orders remained in decline. Finished goods inventories and raw materials inventories built up at about the same pace as in August. Manufacturing employment fell and the average work week shrank, while wage growth remained robust.

Looking ahead six months, manufacturers' optimism about business prospects strengthened. Firms expected a greater volume of new orders, rising capacity utilization, with shorter lead-times and a solid increase in shipments. Further, they anticipated that the backlog of orders would grow. Additionally, survey participants expected a jump in capital expenditures. Manufacturers looked for the number of employees to climb and average workweek to moderate. Their outlook was for slightly slower average wage growth.

Raw materials and finished goods prices rose more quickly in September compared to last month. In addition, relative to their outlook of a month ago, surveyed manufacturers expected prices to rise more quickly in the next six months.

Here is a somewhat closer look at the index since the turn of the century.

Is today's Richmond composite a clue of what to expect in the next PMI composite? We'll find out when the next Manufacturing ISM Report on Business is released on October 1st.

Because of the high volatility of this series, we should take the data for any individual month with the proverbial grain of salt.