The manufacturing sector in the U.S. central Atlantic region fell back into contraction in October after briefly stabilizing in the previous month, according to a survey from the Federal Reserve Bank of Richmond released Tuesday.
The Fifth District Survey of Manufacturing Activity’s index of general business conditions fell to minus 10 in October from zero in September. Readings below zero indicate a decline in activity.
The results were worse than expected. Economists had forecast a decline to negative three.
The Richmond Fed’s index is based on surveys of manufacturing firms across the Fifth Federal Reserve District, which covers the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.
The survey indicated a contraction or stagnation for six months.
The primary demand measures in the survey—new orders and shipments—declined over the month. The new orders index has been negative for 7 months in a row. The October reading was the worst since May of 2020. Shipments turned negative after rebounding to positive territory in September.
The Richmond Fed said that there has been little indication of supply chain relief since August, as the indexes for vendor lead time and backlog of orders remained steady, although both have improved dramatically since earlier this year.
Despite the signs of sagging demand, inflationary pressures increased. The average growth rate of prices paid and prices received both increased again in October, after moderating in September. Expectations for both over the next 12 months also increased slightly from September.
The employment index remained unchanged at 0 in October, which the Richmond Fed attributed to persistent hiring challenges. The wage index fell slightly but remained elevated. The index of local business conditions index slid from -5 in September to -16 in October, with considerably more firms pessimistic about conditions over the next six months.
Last week, the New York Fed reported that its gauge of manufacturing activity fell for the third straight month, deeper into contractionary negative territory. Similar to the Richmond Fed survey, the index declined amid high levels of inflation, with the prices paid index rising nine points to 48.6 and the prices received holding steady at a high level. The Philly Fed’s survey also showed inflation worsening while demand sagged.