Manufacturing activity in the Fifth District expanded for the tenth consecutive month in August, with the Richmond Fed Manufacturing Index remaining unchanged from July at 14, exceeding consensus expectations of a decline in the index to 11. Strength in the employment components offset softness in shipments and a slight decline in new orders.
In current conditions, 5 components increased, 3 declined and 2 remained unchanged. Shipments fell 5 points to 8 and the volume of new orders declined by 1 to 17. Inventory levels of finished goods fell 2 points to 15 while raw materials increased by 2 points to 19. Backlog of orders and vendor lead times remained unchanged at 11 and 7, respectively, while capacity utilization was up 1 point to 10. On the jobs front, the number of employees rose 7 points to 17, wages increased 1 point to 18, and the average workweek rose 1 point to 10.
While still exceptionally optimistic, the expectations portion of the survey showed modest declines in all categories except vendor lead time, which rose 3 points to 10 in August. Although the extremely high readings in July left almost no room to rise, such as shipments, which fell from 50 in July to 45 in August, the broadness of the retreat in optimism may be of note. The largest decrease in expectations occurred in the backlog of new orders, down 16 points to 19.
Inflation pressures moderated in both prices paid and prices received. Expectations of a rise in prices received declined while they were steady for prices paid.
Like other regional surveys, Richmond Fed's manufacturing index has been unusually strong, rising to 14 in July with forecasters calling for only a slight give back in August to 11. Back in March and April, this index posted its first back-to-back showings over 20 since 1994.