As you may have expected after the Federal Reserve decided to hold interest rates flat last week, we have another weak economic reading. The Federal Reserve Bank of Richmond announced on Tuesday that manufacturing in the Fifth District slowed and went negative in the month of September.

The index fell to -5 in September. This was lower than the 0 reading in August and lower than the consensus reading of 3 posted by Bloomberg. The Econoday forecast group had a range of estimates from 2 to 5 for the month.

Tuesday’s report from the Richmond Fed indicated that order backlogs and new orders decreased at the same time that shipments declined. One boost was seen in average wages, which continued to increase at a moderate pace this month, while manufacturing employment grew mildly. Prices of raw materials and prices of finished goods rose, although at a slightly slower pace compared to last month. The Richmond Fed said:

Manufacturers anticipated improved business conditions during the next six months. Producers expected faster growth in shipments and in the volume of new orders. Additionally, survey participants expected order backlogs to grow and anticipated increased capacity utilization. Expectations were for longer vendor lead times during the next six months. … Firms expected faster growth in the number of employees and looked for average wages to grow more quickly in the months ahead. In addition, survey participants looked for moderate growth in the average workweek. Looking ahead, manufacturers anticipated faster growth in prices paid and prices received.

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Formal details were as follows:

• The composite index for manufacturing decreased to a reading of -5 from 0 the prior month.
• The index for shipments remained negative, only gaining one point to end at -3.
• The volume of new orders decreased to -12 this month, losing 13 points from last month’s reading of 1.
• Manufacturing employment increased by two points to end at a reading of 3.
• Capacity utilization decreased 14 points this month to finish at a reading of -19.
• Backlogs fell nine points to finish at -24.
• Vendor lead time moved down two points to a reading of 7.
• Finished goods inventories rose at a slightly slower rate than a month ago, but it was down by three points to end at 21.
• Raw materials inventories rose at a slower rate this month, losing two points to end at 22.
• The indexes for expected shipments and new orders strengthened to readings of 48 and 42, respectively.
• Survey participants expected backlogs would build more quickly in the months ahead. That outlook index fell six points to finish at a reading of 19.
• Firms anticipated vendor lead times would lengthen slightly in the months ahead. That index rose four points to finish at 10.
• The index for future capacity utilization rose by points this month to end at a reading of 33.
• Firms planned to increase hiring in the months ahead, with the expectations index rising seven points for expected employment to end at 26.
• The index for expected average wages rose nine points to finish at 43, and the expected average workweek gauge also strengthened slightly to a reading of 18.

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