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First Cut: Richmond Fed Composite Manufacturing Index plunges in April

The Richmond Fed’s Composite Manufacturing Index for April plunged to a series low of -53 after signaling a false dawn with an increase to +2 in March after -2 in February. The Whetstone Analysis calculation for a six-month expectations index was little changed at -12 in April after -14 in March. Current conditions in the District’s manufacturing sector as expressed by the index’s three components was the worst it has ever been.

The reading of -61 for the new orders index was a series low and reflected a collapse in orders after the 0 (zero) in March. The shipments index was also at a series low at -70 after 13 in the prior month. The employees index was at -21 in April, its lowest since -31 in April 2009 and in line with the worst of the employment numbers in the last recession.

Order backlogs fell sharply in April to -42 after an already soft series of numbers in the prior two months.

The index for wages was flat at 0 (zero) in April after 20 in March. The index for available skills was down to -37 in April after -26 in March. It suggested that workers with the right skillsets were off the market during the downturn. The average workweek index contracted sharply to -28 in April after 3 in March. With massive closures of nonessential manufacturing establishments, jobs, wages, and hours have dried up.

Inventories started to accumulate in April with the index up to 19 after 7 in March. Delivery times were not much changed at 28 after 29 and remained fairly lengthy due to supply chain interruptions and displacements.

The index for prices paid actually rose in April to 1.48 after 1.29 in the prior month. The impacts of lower energy costs seem to have been more than offset by some other increases. Prices received were down to 0.92 in April after 1.22 in March and were the lowest since 0.91 in January 2018. Pricing power is largely absent.

The Richmond-ISM Manufacturing Index was down to 39.5 in April after 54.2 in March. The calculation has the best correlation (0.833) among the five District Bank surveys for manufacturing. It points to a steep reduction in activity in the ISM Manufacturing Index when that number is reported at 10:00 ET on Friday, May 1.

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