Manufacturing activity in the central Atlantic region paused in May, after expanding during the previous seven months, according to the Richmond Fed's latest survey. The index of overall activity was pushed into negative territory by weak readings for shipments and new orders, while employment growth held steady. Other indicators suggested additional softness. District contacts reported that capacity utilization turned negative and backlogs fell further, while delivery times grew more slowly. In addition, manufacturers reported an uptick in finished goods inventory growth.Despite the recent decline in activity, manufacturers were generally optimistic about their future prospects in May. Survey contacts at an increasing number of firms looked for solid growth in shipments, new orders, capacity utilization and capital expenditures over the next six months.
This is further evidence of a broader manufacturing slowdown taking place.
Consider this news in conjunction with the following:
Sentiment remains sour, with increased chatter of an economic “slow patch” addling investors. Late yesterday, Applied Materials added to that discussion when it reported robust second-quarter earnings — and then warned of sluggishness up ahead. Its shares fell 2% after-hours.Technology stocks, like Applied Materials, have struggled throughout May amid a rising chorus of slowing business activity. Even storied Apple is flagging, its shares down 6% in the past month.
There’s a gnawing sense that folks faced with still-expensive gasoline aren’t splurging on fancy gadgets, or much of anything. Johnson Redbook reported Tuesday that retail sales fell 2.6% in the first three weeks of May compared with the previous month.
Reflecting the fretting about the economy, J.P. Morgan downgraded its second-quarter growth expectations to 2.5% from 3.2%. The main culprit: weaker auto production, largely due to supply disruptions caused by the March Japanese earthquake/tsunami/nuclear disaster.
