I stopped posting the Fed regional reports because diffusion index have huge problems and there are a built-in survival and reporting bias issues as well.

The December Richmond Fed Manufacturing Report contains some interesting stats this month, so let's take a look.

Richmond Fed Activity Components

Image placeholder title

Key Activity Index Stats


  1. Shipments -25
  2. New orders -9
  3. Order Backlog -18
  4. Local business condition -25
  5. Finished goods inventory +13

Twilight Zone Employment

  1. Number of employees +14
  2. Average workweek +3
  3. Availability of skills -28

Shipments crashed, inventories are up, new orders are down, business conditions are terrible, and there are no skilled workers available to hire.

Yet, supposedly, employment and the average workweek are up.

I suspect diffusion index magic, something like this: A handful of companies hired one or two more workers, offsetting those who fired hundreds because by diffusion magic, 1=100. 1 also equals 200, 500, and 33.

Diffusion indexes measure direction, not amount. Thus, one company firing 100 and another hiring 1 nets to zero.

Mike "Mish" Shedlock

Philadelphia Fed Manufacturing Survey Shows Employment Index Highest in 48 Years: Reality Check Time

I stopped commenting on the Fed regional manufacturing reports some time ago because they bear little resemblance to reality. Today's Philly Fed report is a real "gem," showing just how screwed up diffusion indexes are, so it's worth a look.

Philadelphia Fed Manufacturing Index Surges Again, Positive for Ten Months

The Philadelphia Fed Regional Manufacturing Index surged again this month but remains below two higher recovery highs.

Philly Fed Prices Paid Index Jumps to 59, Up From 44

The Philly Fed prices paid index jumped in April. 59% of firms reported paying more for inputs, up from 44% in March.

Cracks Appear in Philadelphia Fed Regional Manufacturing Report

Actual industrial output has been far weaker than the regional Fed manufacturing reports and the ISM report for at least a year.

Tale of Two Indexes: Non-Manufacturing ISM vs Markit PMI

The ISM Non-Manufacturing Index strengthened in October. Markit's Service PMI weakened.

Same Old Song: Bogus Philly Fed and Regional Manufacturing Reports

The Fed's regional reports have been so wrong for so long I stopped reporting on them. Just for grins let's take a peek.

Markit Composite PMI: Yet Another Diffusion Index Incorrectly Showing Strength

The Markit USA flash (preliminary) composite PMI shows strength this month, as have other diffusion index reports including ISM and the Fed regional reports. Delivery delays contributed to manufacturing strength. Those delays are a hurricane impact, as are reports of hiring.

Fed’s Labor Market Index Discontinued

THe Fed discontinued its report on the Labor Market Index this month. The rationale makes sense and could equally apply to many reports and procedures.

Too Hot to Handle Twist: Econoday “Thankful” for Empire State Manufacturing Cooling

The Econoday consensus estimate for the Empire State manufacturing index was +15.0 in a range of 13.0 to 17.2.