Research >> Economics
Richmond Fed's Current Activity Index dropped 9 points to a reading of -1
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Fifth District manufacturing activity slowed in May, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and backlogs decreased, and order backlogs flattened this month. Manufacturing hiring rose modestly, while average wages continued to increase at a moderate pace. Prices of raw materials and finished goods rose more quickly in May, compared to last month.
Despite the soft current conditions, firms remained optimistic about future business conditions. Expectations in May were little changed from April readings. Firms expect moderate growth in shipments and in the volume of new orders in the six months ahead. In addition, manufacturers looked for rising backlogs of new orders. Producers anticipated a decline in capacity utilization and unchanged vendor lead times in the next six months.
Survey participants looked for modest growth in hiring during the next six months. Wage increases were expected to continue to be widespread. Producers anticipated little change in the average workweek. Looking ahead, manufacturers expected faster growth in prices paid and received.
Overall, manufacturing conditions softened in May. The composite index for manufacturing flattened to a reading of −1. The index for shipments dropped sharply, decreasing 22 points to end at −8. Additionally, the new orders index fell 18 points, leveling off at 0. The manufacturing employment index remained at a modest reading this month; the indicator moved down four points to end at 4.
Backlogs decreased in May, with the index settling 24 points lower at a reading of −13. The capacity utilization index also slipped 24 points this month, pulling the index down to a reading of −6. Vendor lead time lengthened modestly, with that indicator gaining four points to end at 6. Finished goods inventories rose across more firms compared to a month ago — the index gained five points, ending at a reading of 19. Growth in raw materials inventories also broadened in May, with that indicator adding 10 points to end the survey period at 25.
Posted: May 24, 2016 Tuesday 10:00 AM