Manufacturing activity in the Fifth District cooled to a more moderate growth pace in December, with the Richmond Fed Manufacturing Index declining 10 points from November to 20. The fourteenth consecutive monthly expansion fell back from November's reading, the highest since 1993, largely on the back of declines in the indices for new orders, down 19 points to 16, backlog of orders, down 25 points to minus 4, and shipments, down 9 points to 24.
Most of the other current company conditions components of the index also posted declines, including capacity utilization, down 3 points to 16, vendor lead times, down 12 points to 6 and average workweek, which was down 9 points to 8.
But the employment front otherwise continued to build on strength, exhibiting the only acceleration in the current company conditions of the December data, with the number of employees rising by 2 points to 20 and wages increasing by 1 point to 22.
Another positive in current conditions were inventory levels, with finished goods rising 8 points to 17 and raw materials up 4 to 24.
Despite the moderation in current company conditions, optimism among manufacturing executives increased on nearly all fronts in December, with expectations exceeding November's exuberance in all readings except vendor lead times, which fell 3 points to 7.
Manufacturing firms also reported continuing albeit more moderate price growth in both prices paid and prices received, although they expected price growth acceleration in the coming six months.
Today's report shows manufacturing in the Richmond Fed region expanding at a slower pace in December than analysts expected, but the deceleration was still only about half the size of the pickup in November, and does not much alter the picture of robust strength in the Fifth District's factory sector seen this year.