Richmond Fed Index – New Record

It appears manufacturing activity in September was strong based on the regional Fed indexes and the Markit flash reading. There could be weakness in the service sector as was shown in the flash Markit reading.

As you can see from the chart below, the Richmond Fed manufacturing index hit a record high. This index started being calculated in 1993. The 29 reading in September beat estimates for 20, the highest estimate of 25, and the August reading of 24.

The shipments index was up 10 points to 33 and the volume of new orders index was up 9 points to 34. Local business conditions soared from 13 to 27 and capex increased 8 points to 29.

Interestingly, services expenditures fell from 12 to 5 which is similar to the Markit services PMI. We’ve seen some stats showing the manufacturing labor market has weakened.

This report shows similar results as the number of employees index fell from 25 to 16. The availability of skills needed improved from -17 to -11.

Unlike some other regional Fed reports, inflation increased as the prices paid index increased from 3.31 to 3.47. The prices received index went from 1.58 to 1.93. The wages index went from 27 to 33 which is extremely strong. Maybe the decline in hiring is related to finding qualified workers as wage growth is very strong.

It’s interesting to see how hurricane Florence seems to have had no effect on this report. The expectations index was strong, but a few components weakened.

New orders fell from 37 to 40 and local business conditions increased 6 points to 32.

Future investment expectations fell as the capex index fell 8 points to 29 and the expected spending on equipment and software fell 9 points to 32. Overall, this was a strong report which signals the September ISM PMI will be strong.

Richmond Fed Index – Very Strong Consumer Confidence

Unsurprisingly, September consumer confidence as measured by the Conference Board hit 138.4 which shows extreme optimism.