TABLE-Richmond Fed composite index -2 in October

What happened

The Richmond Fed's manufacturing composite index was -2 in October, unchanged from September. New orders fell to -8, backlog orders dropped to -21, and the employment index eased to 3. A reading below zero signals contraction.

Confirmed

Global impact / market context

A negative reading means factory activity in the fifth district is shrinking, and falling new orders and backlogs point to weaker future production. That can reduce companies' revenue and make them postpone capital spending, which is money for equipment and expansion.

Analyst inference

The fifth district produces about 9 percent of US gross domestic product, so continued contraction there can weigh on national factory output. Investors may treat the weak orders and backlog figures as a sign of softer demand ahead for industrial companies.

Analyst inference

What to watch

1. Watch whether the composite index stays below zero, since negative readings indicate contraction in fifth district manufacturing, per the survey's notes. Confirmed
2. Watch whether new orders and backlog orders recover from -8 and -21, because weak order numbers can signal softer future production and revenue for manufacturers. Proposed
3. Watch the employment index, which eased to 3, and wages at 20, because slower hiring could affect worker income and household spending in the region. Analyst inference

Evidence

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