Richmond Federal Reserve Reports Contraction of Factory Sector Activity; Services Weaken

The Federal Reserve Bank of Richmond reported that its April Composite Index of Manufacturing Sector activity remained negative at -3 following weak readings of -8 and 0 during the prior two months. Expectations were for -2 in the Bloomberg Survey. The reading for shipments and new orders both were negative for the third straight month. Orders backlogs declined for the sixth straight period though employment increased. The breadth of job increase this year remained subdued, however, versus the readings during the last half of 2014. The length of the average workweek similarly gained this month but the improvement was moderate versus most of last year. The same was true for wages. Pricing power also remained subdued.

Service sector performance also is gauged by the Richmond Fed. The revenue measure plunged m/m to the weakest reading in twelve months. The expected employment index improved m/m but remained, this year, well below the readings for during the second half of 2014. The expected prices paid series also improved modestly in April but remained below the levels of last year's second half.

The Richmond Fed figures are diffusion indexes which are calculated by subtracting the percent of respondents reporting poorer business conditions from those reporting improvement. Thus, they have a good correlation with growth in the series covered. The data is available in Haver's SURVEYS database.