Richmond Fed Calls ‘Do Over’ On June Manufacturing Survey

The Richmond Fed on Wednesday dramatically revised its report — published just a day earlier — on factory activity in the US Central Atlantic region for June.

Yesterday the Richmond Fed said its Fifth District Survey of Manufacturing activity’s index plunged to minus 19 in June from minus nine in May. On Wednesday, the regional Fed said the index had only declined to a minus 11.

“Incorrect data were initially reported on June 28 for the monthly Fifth District business surveys, because of an error related to the discontinuation of the average workweek index,” the Richmond Fed reported. “The data on the website was corrected and is now accurate.”

Breitbart News reported problems with the data on Tuesday. The estimate for prices of manufactured goods, for example, showed businesses expected their prices to drop by 32 percent. That would indicate not just a recession but an extreme economic depression, likely enough to wipe out the entire sector. Manufacturers rarely expect the prices will fall. In fact, there has never been a negative figure for expected inflation in the Richmond Fed data.

The minus 11 reading is the second consecutive monthly decline for the composite index. The index has not declined for two months in a row since April through May of 2020.

Readings above zero indicate an expansion of activity. Negative readings indicate activity contracted.

The local business conditions index continued to decline in June, falling to minus 28. Firms also grew less optimistic about conditions in the next six months as the expectations index decreased to minus 26 in June from minus 13 in May. Both figures were misreported in the Tuesday release.

The index is based on a survey of manufacturing firms across the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.

On Monday, the Dallas Federal Reserve said that its index of general activity had also plunged deeper into negative territory, falling to minus 17.7 from minus 7.3 in April. The Empire State survey, compiled by the New York Fed, remained in contraction territory in June for the second month in a row, although it improved to minus 1.2 from minus 11.6 in May. The Philadelphia Fed declined for the third consecutive month to minus 3.3, the first negative reading on that index since 2020. The Kansas City Fed’s survey remains in positive territory but has declined for three months in a row.

New orders and shipments fell further into negative territory for the month. The new orders index fell to minus 26 in June from minus 16 in May. (This was reported as falling all the way to minus 38.) The shipments index declined from negative 14 to negative 15 (initially reported at negative 19). Expectations for new orders fell deeper into negative territory while shipments expectations fell to five from 19.

The employment index rose to 16 from eight, indicating that hiring expanded (but not as much as the original figure of 23 suggested). The wage index slipped but remains at an elevated level, indicating that many firms continue to increase wages.

Manufacturers reported their prices were up 10.4 percent compared with 12 months ago, an acceleration of inflation from 9.6 percent in May. This matches the all-time high for this series hit in January. Inflation in prices received has risen for three consecutive months.

Prices paid moved down to show prices up 11.9 percent from a year ago, down from 15.1 percent in May. This partly reflects the fact that prices were already rising at an 11 percent pace in June of last year. June 2021 was the first time the Richmond Fed’s barometer of prices paid for materials crossed into double digits.

And that Great Depression-indicating inflation expectation data? Relax. It now just shows more inflation ahead.

Manufacturers expect to increase their own prices 4.6 percent over the coming year and to pay 5.4 percent more for materials, both representing an easing from the 12-month expectations recorded in May. So there still has never been a negative number for inflation expectations in the survey.

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