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First Cut: Richmond Fed Manufacturing Index slips below neutral in November

The Richmond Fed’s Composite Manufacturing Index slipped to -1 in November from 8 in October and continued its seesawing between firmer and softer months in the second half of 2019. The Whetstone Analysis calculation for a six month expectations index was 26 in November, little changed from 27 in October.

The November Richmond index was down from October on declines in all three components with weak new orders (-3 after 7), falling shipments (-2 after 4), and slowing employment (5 after 13). Elsewhere, order backlogs contracted sharply (-11 after 6) and inventories were up more than might be comfortable in the current environment (15 after 5). Delivery times hovered near neutral (1 after -3).

If the region’s factory sector is seeing slower hiring as well as a shorter workweek in November from October (3 after 10), those workers being hired are more sought after because of a lack of available skills (-18 after -6) and getting better compensation (24 after 15).

The index for prices paid declined to 1.55 in November after 2.40 in October. The index for prices received was little changed at 1.80 after 1.71. There may be scant upward price pressures at the moment, but businesses in the factory sector are also limited in their pricing power.

The Richmond-ISM equivalent index — computed from the five components most like the ISM Manufacturing Index — declined to 51.6 in November from 52.6 in October. The Richmond measure has a solid correlation with the ISM index and a downward move suggests that the national Manufacturing Index will remain in recession for a fourth month when it is reported at 10:00 ET on Monday, December 2.

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