What is the Richmond Fed’s Survey of Fifth District Manufacturing Activity?
This is a monthly survey conducted by the Federal Reserve Bank of Richmond. The typical survey size is approximately 100 respondents whose firm type, firm size, and location collectively match the profile of overall manufacturing in the Fifth District. Respondents provide information on current activity, including shipments, new orders, order backlogs, and inventories and also provide feedback with respect to business expectations over the next six months. The headline number is the composite index for the current month’s activity. It’s a weighted average of the shipments (33%), new orders (40%), and employment (27%) indexes.
The Richmond Fed announced the results of February’s survey on Tuesday, February 25. February’s reading slipped to -6, down 18 points from January’s reading of 12 as manufacturing sector growth had softened compared to last month. Business confidence was also lower compared to last month. Both shipments and new order volumes declined. Manufacturers reported flat hiring trends, and while the average workweek shortened, average wage growth increased compared to January. Producers also anticipated slower growth in capacity utilization.
Prices lower compared to January, though inflation expectations increase
The most important takeaways from the February survey were inflation expectations. While both input costs and finished goods prices declined at a slower rate in February compared to January, survey respondents expected input costs to rise at an annualized pace of 2.25% over the next six months though the outlook for finished goods prices indicated only a 1.39% increase. Higher cost increases in comparison to revenues would squeeze margins and hurt future profitability.
What were the results of the manufacturing survey conducted by the Kansas Fed? Move on to Part 10 of this series to find out.