The Richmond Fed’s manufacturing survey was released this morning showing a modest improvement in conditions in the month of April.  The headline number rose by a point to 14 which is still in the middle of the pandemic range of readings and the highest level since December.

Richmond fed manufacturing

In spite of the improvement in the composite index—a weighted average of shipments, new orders, and employment—the breadth of this month’s report was negative with over half of the categories declining month over month.  Two of those declining categories were new orders and employment which are again inputs for the composite.  That means the higher reading of the composite was entirely thanks to the 8-point increase in shipments.

Looking across other areas of the report, expenditures were weaker while inventories are recovering from historic lows.  While business conditions are mixed to deteriorating, supply chains are showing signs of improvement as evidenced by the increase in shipments.

Richmond fed economic data

While shipments were an area of strength, another input to the composite, new orders, fell 4 points and is back near the middle of its historical range.  Expectations, however, experienced a sizeable rebound with that index rising 9 points.  While that increase bucks the trend of weak expectations readings relative to current conditions that we have seen in other regional Fed surveys (which we discussed in last night’s Closer), this index’s increase was the exception rather than the rule. As shown in the table above, only a handful of other expectations categories rose month over month with many declines ranking in the bottom decile of monthly moves.

The big increase to shipments left that index at the highest level since last July as backlog of orders are growing at a substantially more modest pace compared to earlier in the pandemic.  One likely reason that both of these readings are improving is a coincident improvement in supply chain stress.  The index for lead times saw an 8-point decline ranking in the bottom 5% of all monthly moves. That leaves the index one point above the December low of 35.

Richmond fed economic data

Employment metrics were mixed this month. The region’s firms are still hiring on a net basis, but hiring has peaked and declined again in April.  That was in spite of firms also reporting better availability of workers with in-demand skills as that index rose to the highest level since July 2020. With that being said, the negative number indicates a still insufficient supply of quality talent. Wages, meanwhile, saw one of the larger increases in recent months rising to the highest level since September. The average workweek was unchanged at a healthy level in the top 5% of its historical range, but expectations are calling for declines in hours worked on the horizon.  Click here to learn more about Bespoke’s premium stock market research service.

Richmond Fed economic data

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