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First Cut: Richmond Fed’s manufacturing index lower, but modestly expansionary in March

The Richmond Fed’s composite manufacturing index dipped to 10 in March after 16 in February. If reflected declines in new orders (down to 9 in March after 19 in February), shipments (2 after 12), but a rise in employment (23 after 15). While the pace of new orders and shipments may be more volatile at present, it is not enough to derail the need for skilled workers to meet demand. The Whetstone Analysis calculation for a six-month expectation index based on the weights of the current composite indicated that the outlook improved somewhat in March from the prior month (31 after 27).

Prices paid moderated to 2.84 in March from 3.03 in February, likely in line with lower energy costs as well as some easing up in other commodities. However, prices received remained little changed at 2.07 in March from 2.06 in February, hinting that some pricing power remains.

The Richmond-ISM equivalent index fell to 55.8 in March from 56.4 in February. The decline was due to the fall in orders and shipments that more than offset the rise in employment, delivery times, and inventories. Both the Richmond composite index and the Richmond-ISM equivalent have strong correlations to the ISM Manufacturing Index. Unlike the New York, Philadelphia, or Texas surveys of manufacturing, it suggests a small decline in the ISM number from 54.2 in February.

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