Wednesday, September 23, 2009

Richmond Fed Shows Expansion

From the Richmond Federal Reserve:

In September, the seasonally adjusted manufacturing index — our broadest measure of manufacturing activity — was unchanged from August's reading of 14. Among the index's components, shipments edged up one point to 22, new orders lost five points to finish at 13, and the jobs index picked up five points to end at 5.

Other indicators varied. The capacity utilization measure moved down six points to 16, and the orders backlogs and delivery times indexes turned negative, losing nine and five points, respectively, to end at −5 and −3. Our gauges for inventories grew more slowly in September. The finished goods inventory index trimmed four points to 18, while the raw materials inventory index dropped six points to 12.

Here is a chart of the overall index:

Notice the index is at levels associated with several other high points that occurred during the last expansion.

Let's look a little deeper into the numbers:

Click for a larger image

The volume of new orders has decreased for the last two months. While this isn't enough to call a trend, it does indicate the pace of activity may start to slow in the next several months. However, the employment index has increased over the same time period, which is positive. However, as Invictus pointed out yesterday, the future employment numbers indicate hesitation. The number of expected employees is still hovering around 0 and the expected average workweek is trending lower. My guess is there is little visibility at this point -- that is, no one has a clear idea of whether of not the economy will be producing orders over the next 3-6 months. That is to be expected at this point in the recovery; the economy is just turning around so there are still going to be a lot of questions regarding sustainability.