The final regional Fed manufacturing index of the month came out today from the Richmond Fed. The headline index continued to improve rising 10 points in July indicating the first expansion in the region since March and the highest reading for the index since January.
Along with the headline index, just about every sub-index posted expansionary readings. Shipments, Capacity Utilization, and Availability of Skills are in the upper decile of historical readings. When it comes to the indices for future expectations. even more categories are around some of their highest readings on record. For example, the indices for future conditions for Shipments, New Orders, Order Backlogs, Capacity Utilization, Vendor Lead Times, Local Business Conditions, and Number of Employees are all in the 90th percentile or better.
The only areas that remain on the weak side for both present and future conditions are for expenditures. For current conditions, Capital Expenditures, Equipment & Software Expenditures, and Services Expenditure are all at the low end of historical readings with little improvement in July. Additionally, a greater share of companies continue to report decreases than increases in their workforce as the index for the Number of Employees remained below zero for a fifth consecutive month. Altogether, this points to a generally improved backdrop for mid-Atlantic manufacturing businesses, though they remain hesitant to invest back into and expand their businesses.
Even though the manufacturing sector has staged a massive turnaround, the same cannot be said for the services sector. Service sector businesses did report Local Business Conditions improved in July, but Demand, Revenues, Expenditures, and employment all remain in contraction. Expectations are more optimistic, but there were some large declines this month, namely in the expectations indices for Revenues, Demands, and Local Business Conditions. Click here to view Bespoke’s premium membership options for our best research available.