Regional Fed Surveys Confirm Manufacturing Rebound: Services, Not So Much

Yesterday, I looked at the economically weighted ISM manufacturing and services indexes, pointing out that they have shown a rebound this year. Today, let’s take a brief look at the regional Fed manufacturing and services indexes.

Below are the manufacturing and services indexes, averaged over the four Fed districts whose reports are picked up on FRED: namely, New York, Philadelphia, Texas, and Chicago [Note: for unknown reasons, FRED does not publish the Richmond and Kansas City Fed regional numbers].

Here is the average of the four regional manufacturing indexes:

Just like the ISM manufacturing survey, shown below, they showed a change from contraction to expansion late last year that has intensified this year:

Most likely, this is due to the AI data center building boom (or bubble).

Now, here is the average of the four regional service indexes:

Very much unlike the ISM services index, shown below, they have shown consistent contraction throughout the entire last 18 months:

I am inclined to go along with ISM in this case, mainly because employment in services has shown consistent growth in the monthly payrolls reports, as well as consistent increases in personal spending on services even after adjusted for inflation, and also the very strong weekly Redbook consumer spending reports, the most recent of which, for this week, continued the trend:

Weekly spending YoY was up 11.5% YoY per Redbook, another new four-year high.

I am not sure why the regional Fed services indexes are not picking up on the growth that appears to be shown everywhere else.