The factory is up and running again
There is growing evidence that this is the case. The manufacturing sector is recovering.
of federal reserve bank of richmond On Tuesday, it reported that a survey of regional manufacturing activity showed positive numbers for the first time since spring 2022. The composite index rose from minus 7 in August to plus 5 in September.
The Richmond Fed’s report calls this “not very high.” Recovered to positive territory September is noteworthy. In fact, September’s readings are above the long-term averages of the three indexes. It is also above the post-pandemic average of two cases from April 2021.
Key demand indicators turned positive within the month. of New order index The index rose from -11 to +3, entering positive territory for the first time since March 2022. shipping index The index rose from -5 in August to +7, marking the first positive turn since January 2023. Capacity utilization The index improved from -11 to +6, the first time it has turned positive since May 2022.
The index showing the number of employees at manufacturers turned positive., rose from minus 3 to 7. This is the first time since October 2022 that this indicator has turned positive, indicating employment growth.
texas is cooking
Monday, ahead of the Richmond Fed report. dallas federal reserve bank” The survey showed that Texas manufacturing resumed growth in September. The production index, a key indicator of the state of the state’s manufacturing industry, rebounded nearly 20 points to 7.9, the highest reading of the year and the first positive figure since April of this year.
The Dallas Fed’s new orders index rose 11 points to -5.2. This is still in negative territory, indicating that demand is still declining, but not at the pace seen in the past few months. this is. . .was second best read It first became negative in May 2022 and is now just behind -4 in January 2023.
of texas shipping index After falling to 15.8 in August, it rose to near zero. -1.1, which is the strongest shipment volume since December of last year. The capacity utilization index returned to positive territory, rising from -3.7 last month to 7.8 in September. This is the first positive increase since April and the highest level since December 2022.
of texas employment index It led by nine points to 13.6, far exceeding the series average of 7.9 and marking its highest score since January.
Philadelphia and New York send mixed signals
The Richmond Fed and Dallas Fed surveys are just two of five manufacturing surveys released by the Federal Reserve’s regional district banks. Last week both new york fed bank And that philadelphia fed bank The results of a survey on the manufacturing industry were announced. (Neither includes capacity utilization measurements.)
new york fed bank The new orders index “jumped” 25 points to 5.1, the company announced. This was the highest level since July 2022. The shipment index rose 24.7 points to 12.4.Employment fell by 1.3 points to -2.7, but remained 3rd best read since January.
Philadelphia told a different story., many measures that were positive in September turned negative. The new orders index had been negative for 14 consecutive months until August, but fell from 16.0 last month to -10.2 this month. The shipment index for September decreased by 9 points to -3.2.
But Philadelphia is an outlier, having done much better than many other cities for nearly a year. Therefore, its negative performance may not be indicative of a trend.
On Thursday, kansas city fed bank We bring you the manufacturing industry index. The composite index was zero last month, up from -11 in July and -12 in June. The production index was 12, the first positive since March 2023 and the second positive since September 2022. Shipments increased by 25 points from -24 in July, resulting in a positive 1 point. If the improvement continues this month, it will add weight to claims that manufacturing is recovering across the United States.
How will the Fed react to a manufacturing revival?
Of course, in this day and age, “Good news is bad news” The recovery in the manufacturing sector raises questions about how the Fed will respond. This question deserves even more attention because the survey’s demand indicators are strong..Monetary policy works primarily by suppressing demand; Therefore, any indication of rising demand could be a red flag for the Fed.
At least the numbers for September are Monetary policy is no longer as restrictive on U.S. manufacturing.. However, these numbers are not strong enough to cause alarm.
of price components Of the survey results Mixed signals on inflation for Fed officials. The Richmond Fed survey showed that the prices manufacturers paid for raw materials rose, but an index of the prices they received fell. A study by the Federal Reserve Bank of Texas shows the same thing: raw material prices are rising, but prices are stable. The Philadelphia Fed survey also suggested that while raw material inflation is rising, finished goods inflation is stable. Only the New York Fed showed an increase in prices received.
Our best guess is that this Still not enough to move the rate hike needle While useful for the Fed, the data is likely to be taken as confirmation of the Fed’s message that interest rates need to be kept high for longer periods of time.
