Last week we learned from the Philly Fed Index that manufacturing activity had slowed in the Third District, which includes most of Pennsylvania, southern New Jersey, and all of Delaware. Today, we got similarly disappointing news from the Federal Reserve Bank of Richmond. This report covers the Fifth District, which includes Maryland, Washington D.C., the Carolinas, Virginia, and most of West Virginia.
Once again, the evidence shows a slowdown in business activity. The composite index fell from +4 in May to -3 in June. It was +14 in April. There was significant deterioration in key individual components of the index as well. Shipments were down and backlog fell. The volume of new orders plummeted, as did capacity utilization and the average workweek. There was an increase in inventories. Input prices and prices for finished goods increased, but at lower rates than in May and April. Perhaps because conditions worsened,manufacturers expect (or hope) that future conditions will improve.
Today's report from the Richmond Fed adds to the evidence that the economy is worsening. Whether the slowdown has anything to do with the crisis in Europe is not entirely clear. Whatever the reason, it is apparent that there is a lack of confidence in how governments worldwide are addressing today's serious economic problems. Furthermore, InvestmentNews reports that 70% of the 450 financial advisers surveyed by Brinker Capital claim that their single biggest fear is another four-year term for the Obama administration. Financial advisers tend to cater to the affluent so this finding may not be surprising. Nonetheless, it does not bode well for an administration that needs the affluent to help finance its reelection campaign.
