Manufacturing activity in the central Atlantic region expanded in April for the seventh straight month but at a more temperate pace than a month ago, according to the Richmond Fed's latest survey. All broad indicators — including shipments, new orders and employment — continued to grow but at a rate below March's pace. Other indicators were mixed. Fifth District contacts reported that capacity utilization continued to grow more slowly, while backlogs turned slightly negative. Vendor delivery times edged higher and raw materials inventories grew at a somewhat higher rate.
This is the third regional manufacturing survey to show a drop in its latest reading. While this is only one month of data, the breadth of the data (the number of regions showing a drop) is concerning. I'm assuming that some of this is the result of the supply chain problems caused by Japan, but I'm also thinking we're starting to see the effects of China's continued effort to slow its economy through a combination of higher interest rates and reserve requirements, along with other rate increases from Asian and South American countries.
Manufacturing has been a driver of the current expansion, making these readings that much more concerning.