With Hurricane Florence crashing into the North Carolina coast earlier this month and the subsequent flooding that followed, a natural question among investors is how would the hurricane the regional economy. North Carolina is part of the Richmond Fed district, so a quick way to asses the damage would be to look at the most recent data from the Richmond Fed Manufacturing report. Below we show the three month average of the Richmond Fed’s manufacturing composite index. This index tends to be very volatile so we’ve smoothed it out a bit, but the September reading was a record at 29. For the states covered by the Richmond Fed (Maryland, Virginia, West Virginia, and the Carolinas), this was the best manufacturing backdrop in the history of the index’s data.
One thing to keep in mind with the most recent data is that while it covers the month of September, most of the survey responses were gathered before Hurricane Florence made landfall, so the full impact of the hurricane won’t be borne out until next month’s report. That being said, with the index at an all-time high, there doesn’t seem to be much of a negative impact even from survey responses that came in after the hurricane made landfall.
We would argue that re-weighting the Richmond data to be consistent with the ISM Manufacturing index delivers an even more impressive result. In the chart below, we show that re-weighted version of the index. Similar to the aggregate index, this re-weighted version is at a record, with a reading equivalent to an ISM Manufacturing print over 75! Simply put, the South Atlantic economy is cooking despite the challenge posed by Hurricane Florence.
The strong performance of the regional economy is also visible in home prices. The South Atlantic Region (which includes Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, and Florida) has seen its home price performance come in much stronger than the national since relative strength bottomed back in 2011. July data, updated this morning by the FHFA, showed new highs for the region’s prices versus the broader national index. Of course, this data does not include the impact of Florence, but it still shows a very positive backdrop for the regional economy heading into the storm.