Richmond Fed Manufacturing Survey Unexpectedly Slumps

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Manufacturing activity across the central Atlantic region of the U.S. unexpectedly softened in November, data from a survey from the Federal Reserve Bank of Richmond showed Tuesday.

The Fifth District Survey of Manufacturing Activity’s composite index came in at 15 in November, a steep decline from October’s strong reading of 29. Economists had forecast for the index to hold steady or decline only mildly.

The Richmond Fed said that despite the decline, the index “remained firmly in expansionary territory.”

This is the fourth report indicating softening in the manufacturing sector since election day. Last week, reports from regional Fed banks in Philadelphia, Kansas City, and New York also showed sharper than expected declines in November.

November’s decline brings to an end a six month run of improvement for the index, which plunged to a record low of minus 53 in April amid the lockdown to stem the spread of the coronavirus.

The measures of new orders, shipments, and employment all fell sharply. The gauge of capital spending declined into negative territory.

Manufacturing businesses remain optimistic, however. The measure of expectations for new orders actually improved and expectations for shipments held steady. Troublingly, however, the gauge of expectations for local business conditions declined sharply.

“Survey participants were optimistic about the future, expecting growth to continue in the coming months,” the Fed said in its report. Separately, a report from the Conference Board Tuesday showed consumer confidence had declined markedly in November. That decline was driven by a fall in expectations for the economy, with consumers saying they see little change in the present economic circumstances despite the nationwide surge in coronavirus cases.

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