This morning the Richmond Fed released the fifth and final regional manufacturing report. Consistent with other regional Fed reports released this month, which we discussed through our Five Fed Manufacturing Composite in last night’s Closer and will update with the addition of the Richmond Fed again tonight, manufacturing activity remains in contraction. That being said, the index rose 11 points from a recent low of -16 to -5.

In terms of percentiles, that reading remains in the bottom quartile of its historical range.  However, that is a massive improvement from the bottom 5% reading last month.  Additionally, the month-over-month increase was significant, just shy of a top decile increase. Breadth in this month’s report was solid with only vendor lead times and employment metrics like wages and availability of skills falling further. Most other categories saw higher month-over-month readings with several (like Shipments and New Orders) being historically large.

As mentioned above, demand-related metrics like New Orders, Shipments, and Backlogs of Orders surged in March.  However, coming from very weak readings in February, it is still not a positive picture.  Shipments was the only one of these indices to move back to an expansionary reading.  Shipments expectations were also particularly rosy with the reading of 25 marking the highest level in eleven months. Meanwhile, the Vendor Lead Times index remains around some of the lowest levels on record which indicates firms are reporting rapid declines in the time it takes for products to reach their destination.

Given orders are coming in more slowly and supply chain improvements have made doing business easier, inventories are beginning to build.  Indices tracking both Raw Material Inventories and Finished Good Inventories have rapidly risen over the past several months following deeply contractionary readings throughout 2020 through 2022.  This month, the index for Finished Good Inventories hit a new post-pandemic high while Raw Material Inventories have flattened out after peaking at the end of last year.

Whereas inventory indices have flown higher, price indices are plummeting.  Prices Paid hit a new low of 6.24% with expectations hitting a new low in tow.  Prices Received actually saw a very modest increase following sharp declines since November.

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