Richmond Manufacturing Activity Turns Negative in September as Optimism Wanes

 Manufacturing activity in the Fifth District turned negative in September after slowing in August, with the composite manufacturing index declining from 4 to -2. At the same time, local business conditions also contracted, falling from 4 to -6 in September. In line with a slowing in business conditions, manufacturers are less optimistic about the future, with the outlook for future local business conditions weakening from 16 to 10. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among the index components, shipments declined from 11 in August to -5 in September, while new orders fell from 3 to -6. On the other hand, the index for employment turned positive, rising from -2 to 7, while the index for vendor lead times decreased from 16 to 8. At the same time, the average growth rate for both prices paid and prices received accelerated in September.

Looking ahead, firms expected prices paid and prices received to increase at a faster pace over the next 12 months. Expectations for future shipments rose from 26 to 33, while expectations for new orders stayed the same at 32. Expectations for backlogs stepped down from 6 to 2. Meanwhile, firms’ expectations about equipment and software spending turned negative, slipping from 2 to -5. In sum, businesses in the Fifth District are less optimistic about future business conditions and investment plans.