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Recap: Regional manufacturing conditions only middling in March

With all five District Bank surveys of manufacturing available for March, on balance the outlook for activity in the month is toward continued middling conditions for the factory sector. Weak export orders and activity moved forward in the face of another round of potentially expensive tariffs have sapped present demand.

All five of the regional surveys have at least decent correlations to the ISM Manufacturing Index. The strongest are with Richmond’s Manufacturing Composite Index and the Philadelphia Fed’s general business conditions index. These tell two different stories for March. Richmond’s index points to somewhat more moderate activity at 10 in March after 16 in February, while the Philadelphia number rebounded to 13.7 after -4.1. I think that the Philadelphia report needs to be read as underlying activity somewhere between the two extremes. In this case, it would point to an ISM index reflecting milder expansion than the 54.2 in February when the report is released at 10:00 ET on Monday, April 1.

The two other regional manufacturing surveys also suggest that activity will be slower at the national level.  The New York District report indicates that the factory sector is running well below the activity in 2018. The same is true for the Dallas District. Kansas City’s manufacturing index was the highest in four months and hinted that the factory sector is regaining some upward momentum. However, like the Philadelphia number, it reflects a rebound after a weak month and needs to be viewed with similar caution.

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