In the past I haven't routinely followed the regional manufacturing indexes, but as a resident of the Fifth District, this is one I pay attention to. The Fifth District includes Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia. The Federal Reserve Bank of Richmond is the region's connection to nation's Central Bank.
The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993. The chart below illustrates the 21st century behavior of the diffusion index that summarizes the individual components.
Tuesday the manufacturing composite slipped into contraction territory at -6, down from 3 last month, which was a decline from 6 the month before. Because of its highly volatile nature of this index, I like to include a 3-month moving average to facilitate the identification of trends (now at 1.0).
How representative is this mid-Atlantic region to the larger economy? I calculated the correlation between the Richmond Fed Manufacturing Composite and the ISM PMI Composite Index, which I reported on earlier this month here. It is an impressive 0.82. Is today's Richmond composite a clue of what to expect in the next PMI composite? We'll find out when the next Manufacturing ISM Report on Business is released on May 1st.
Here is a snapshot of the complete Richmond Fed Manufacturing Composite series.
At the national level, the next key indicator I'll be studying as a clue for our current economic health will be posted on Monday, April 29th. It's the Personal Income data in the next Personal Income and Outlays report from the Bureau of Economic Analysis, one of the Big Four Indicators I regularly follow. Meanwhile, Tuesday's Richmond Fed data is flashing a warning, one that is probably not surprising given the expected impact of sequestration on the region. However, the high volatility of this series suggests that we should take the data for any individual month with the proverbial grain of salt.