Macro
Richmond Fed Manufacturing Index Declines to -2 in September, Indicating Contraction
The Federal Reserve Bank of Richmond reported a notable decline in its composite manufacturing index for September, which slipped to -2 from a positive reading of 4 in August. This shift indicates a contraction in the Fifth Federal Reserve District, which encompasses Washington D.C., Maryland, Virginia, North Carolina, South Carolina, and most of West Virginia.
Key components of the survey revealed a sharp drop in shipments, which fell to -5 from +11 the previous month, and new orders, which decreased to -6 from +3. Local business conditions also deteriorated, dropping to -6 from +4. However, employment figures showed a slight improvement, rising to +7 from -2, suggesting that firms are still adding jobs despite the overall decline in activity.
The survey, released on September 22, 2026, reflects a broader cooling trend in the region's manufacturing sector, following positive readings earlier in the year. While expectations for future shipments and new orders remain optimistic, the significant drop in the employment outlook—from +20 to +8—indicates that companies are becoming more cautious about future hiring.
Price pressures have also increased, with manufacturers reporting higher costs, although they anticipate smaller price increases in the coming months. This combination of rising costs and declining orders may impact profit margins and the overall economic sentiment in the region.
FAQ
What does a composite manufacturing index of -2 indicate?
A composite manufacturing index of -2 indicates a contraction in manufacturing activity within the Fifth Federal Reserve District, suggesting that overall business conditions are deteriorating.
How did shipments and new orders change from August to September?
Shipments fell sharply from +11 in August to -5 in September, while new orders decreased from +3 to -6 during the same period.
What does the employment figure of +7 signify?
The employment figure of +7 signifies a slight improvement in job creation, indicating that firms are still adding jobs despite the overall decline in manufacturing activity.
What are the expectations for future shipments and new orders?
Despite the current decline, there are optimistic expectations for future shipments and new orders, although the employment outlook has become more cautious.
How are price pressures affecting manufacturers?
Manufacturers are reporting higher costs, indicating increased price pressures, but they anticipate smaller price increases in the coming months, which may impact profit margins.