Richmond Federal Reserve: Here’s Your Recession

Richmond Fed Manufacturing Survey July

This report is just plain bad:

The pullback in manufacturing activity in the central Atlantic region deepened in July, after edging lower in June, according to the Richmond Fed’s latest seasonally adjusted survey.* The index of overall activity was pushed lower as shipments and new orders declined further into negative territory. Employment remained in positive territory, but grew at a pace below June’s rate. Other indicators also suggested additional softness. District contacts reported that backlogs, capacity utilization, and delivery times continued to contract. Moreover, manufacturers reported that finished goods inventories grew at a much quicker pace, while raw materials were nearly unchanged.


The headline number was -17.  But worse were the internals; shipments went to -23, new orders collapsed to -25, backlogs are non-existant at -27 and capacity utilization went from -4 to -16.  Employee count went from 8 to 1, stall speed while workweeks went into contraction, from 0 to -7.

Finally, prices paid eased but prices received fell more.  Zero pricing power.

And it’s not just goods-producing either.  The service sector was terrible as well, with revenues falling an astonishing 22 points to -11.  Employees went negative at -3, down 9 points.  Retail sales dropped to -18, down 21 points in a month and expected demand clawed at the cliff, remaining just slightly positive at 4 (from 18 last month.)  Shopper traffic has now gone from zero in May (neutral) to -6, the third straight month of bad news.  Retail pricing in the service sector as a whole is anticipated to (and has) risen while retail pricing has gone in the toilet — both realized and expected forward.  (That’s not going to work out well for service firms!)

Richmond is a survey I watch closely as we get service-sector numbers as well, and they just plain suck.  This, along with Philly, screams RECESSION!

I stuck my neck out on Capital Account a few weeks ago before these latest numbers came in, based on my own checks and surveys along with published trends.  Now the confirmation is coming in from the formal surveys and I hope everyone is expecting to hear the crooners start saying the “R” word as well — and is positioned accordingly.

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