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First Cut: Richmond Fed Manufacturing Index nudges higher in May, but six-month outlook softer

The Richmond Fed’s Manufacturing Composite Index nudged up to 5 in May from 3 in April, reflecting modestly higher orders and shipments, and a slight decrease for employment. The Whetstone Analysis calculation for six-month expectations fell to 27 in May from 36 in April. The mild rebound that followed on the end of the partial federal government shutdown appears to have lost steam and is perhaps feeling the pinch of higher tariffs and hi-tech export restrictions.

Richmond’s index showed new orders managed to reach neutral (0) in May after -2 in April, while shipments turned in a trend-like 2 after -2 in the prior month. Employment edged down to 17 in May from 18 in April and suggested that hiring is expanding steadily if more slowly than in most of 2018.

The reading for prices paid declined sharply to 2.21 in May from 3.04 in April, reflecting moderation in energy costs. Prices received also rose more slowly at 1.53 in May from 1.84 in April.

The Richmond-ISM equivalent index computed from the five components similar to the industry report pointed to very little change in activity at 54.5 in May from 55.0 in May. The Richmond number has the second best correlation to the ISM index. It hints that the 52.8 ISM Manufacturing Index for April will probably be little changed when it is reported at 10:00 ET on Monday, June 3.

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