Richmond Fed Manufacturing Index Narrows Decline, Beats Forecasts

Manufacturing activity in the Fifth Federal Reserve District continued to contract in August but showed a markedly smaller decline, according to the Federal Reserve Bank of Richmond’s latest survey. The composite manufacturing index rose to –7 from –20 in July, outperforming the consensus estimate of –11 and signalling an easing in the sector’s downturn. The regional business conditions gauge, a broader measure that captures manufacturers’ assessment of demand and hiring, improved to 6.0, returning to positive territory. While shipments and new orders remained subdued, executives reported less severe declines than earlier in the summer. The Richmond readings add to a mixed picture of U.S. factory performance, suggesting that the sector may be stabilising even as higher borrowing costs and weaker global demand weigh on output. Economists will look to forthcoming regional Fed surveys and the national ISM report for confirmation that the worst of the manufacturing slowdown has passed.