Fed District surveys of manufacturing for modest-to-moderate growth

By Theresa Sheehan, Econoday Economist
April 29, 2022

Of the five Federal Reserve district bank manufacturing surveys published for April, three of the headline indexes are down and two are up. The Philadelphia Fed general business conditions index fell 9.8 points to 17.6, Dallas Fed’s general business activity index declined 7.6 points to 1.1, and the Kansas City composite manufacturing index decreased 12 points to 25. The New York general business conditions index jumped 36.4 points to 24.6, and Richmond Fed’s manufacturing composite index edged up a single point to 14.

It’s hard to reach any solid conclusions for the US factory sector as whole based on the performance of the regional surveys. Those from New York, Philadelphia, and Dallas are diffusion indexes and more reflective of respondent perceptions. The Richmond and Kansas City indexes are calculated from components. These latter two have a high correlation (0.804) with the ISM manufacturing index and both have large factor sectors to survey. Also, both are consistent with moderate activity in regional manufacturing.

An average of the five headline indexes is at 16.5 for April, up from 14.9 in March. The overall average has a strong correlation (0.894) with the ISM manufacturing index. Results suggest that when the April ISM index is released at 10:00 ET on Monday, May 2, it will be above the 57.1 in March. Another ISM report with a headline in the mid- to high-50s would offer some reassurance that the factory sector is avoiding a downturn despite higher interest rates, inflation, and a riskier outlook for the global economy.