The Richmond Fed manufacturing index for July came in far below expectations with a reading of -12 vs. 5 expected, stunting hopes of a surge in the sector. The index is now at its lowest point since January 2013.
Key Takeaways
- The Richmond Fed manufacturing index sunk below a 6-year low at -12 vs. 5 expected.
- The weak results totally defy market expectations which predicted a 2-point gain from the previous result of 3.
The index saw decline in almost all categories. The services revenues index dropped from 16 in June to 11 in July. The manufacturing shipments index saw a major drop from 5 to -13, and new orders dipped further into negative territory from -2 to -18. Backlog orders fell from -3 to -26, capacity utilization fell from -24 to -4, and vendor leadtime fell from 9 to 1.
The number of employees also hit negative territory with a fall from 4 to -3, and the average workweek dipped from 1 to -9. Wages fell 5 points from 25 to 20. Prices paid saw a gain from 1.89 to 3.04, finished goods inventory dipped two points to 17, and raw materials fell three points to 22.
The index is now at its lowest point since January 2013, a major surprise for the market which has seen other regional indices post more positive results recently, fueling hopes that the struggling manufacturing sector may be recovering from the negative effects of the US/China trade war and the general economic slowdown seen worldwide.
While the Empire State manufacturing index rose from 2 to 4.3 and the Philadephia Fed business outlook index rose to 21.8 instead of 5 expected for July, the disappointing results of the Richmond Fed manufacturing index now muddy the waters for those trying to get a sense of the health of the industry as a whole. Last month’s Richmond Fed manufacturing index also came in below expectations with a reading of 3 vs. 4 expected.
Richmond Fed bagged -12, 3 last pic.twitter.com/5PsDL6AvTt
— Teddy Vallee (@TeddyVallee) July 23, 2019
Market Reaction
Gold prices have remained relatively stable following the news, with a brief uptick due to weak manufacturing activity and home sales data. Spot gold last traded at $1,424.13/oz, down -0.08% with a high of $1,428.82/oz and a low of $1,414.84/oz.
Gold Price Chart
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