U.S. Mid-Atlantic Manufacturing Activity Slowed Sharply in August — Richmond Fed

Manufacturing activity across the central Atlantic region of the U.S. lost momentum in August, following declines in other regional surveys, data from the Federal Reserve Bank of Richmond showed Tuesday.

The Fifth District Survey of Manufacturing Activity’s composite index decreased to nine in August from 27 in July. The reading, which is the lowest since June 2020, misses the forecasts from economists polled by The Wall Street Journal, who expected the indicator to come in at 25.

The index is compiled by surveying manufacturing firms across the Fifth Federal Reserve District, which encompasses the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. Positive readings signal expansion, while negative readings indicate contraction.

The industrial sector is expanding across the U.S., but supply-chain bottlenecks and labor shortages are constraining output and factories can’t keep up with orders. Other regional surveys gauging the manufacturing sector have shown signs of activity slowing down in August from recent highs in the previous months.

All three component indexes decreased compared with July and respondents noted that local business conditions are deteriorating, the report said.

The shipments index fell to six from 21 the previous month, while the volume of new orders index dropped to five from 25.

The employment index decreased to 18 from 36 in July. The survey suggests that firms are increasing employment and wages, but also that companies are struggling to find workers with the necessary skills.

Respondents also noted that lead times continued to increase and inventories remained low, showing little signs that the supply-chain bottlenecks hitting the manufacturing sector are easing.

The average growth rate of prices paid by survey respondents declined slightly in August, while that of prices received increased.

Manufacturers in the area were optimistic that conditions will improve in the next six months, albeit to a lesser degree than in July.

The future index for shipments fell to 36 from 41, the future new orders index decreased to 24 from 30, and expectations for employment dropped to 39 from 53 the prior month.
Source: Dow Jones