Richmond Fed Manufacturing Activity Bounces Back To Expansion

Fifth District manufacturing activity surprising bounced back into expansion in October, according to the latest survey from the Richmond Fed, whose composite index rose 17 points to 8. Easily beating the consensus as well as the range of analysts' forecasts calling for continuing contraction, the overall gain reflected increases in all three of the main components, with the index for shipments rising 18 points to 4, new orders gaining 21 points to 7, and employment 10 points 13.

Among current conditions components also moving back into the plus column were backlog of orders (6 after minus 11), capacity utilization (7 after minus 11) and local business conditions (4 after minus 15).

Expectations for the next six months were mostly more optimistic, particularly for shipments, which rose 9 points to 24, and volume of new orders, gaining 11 points to 33.

On the inflation front, growth rates of both prices paid and prices received fell in October, as growth of prices paid continued to outpace that of prices received. Survey participants expected the pace of growth of both prices paid and prices received to slow further in the near future. Wage growth expectations also moderated, falling 9 points to 15.

Today's report hints at a possible rebound for the factory sector where persistent weakness this year has provided some of the arguments for Fed rate cuts.