Manufacturing activity remains stale

Manufacturing activity in five states and the District of Columbia remains stagnant, despite a small improvement in August. This is the latest data point to illustrate the sector remains under pressure.

That's according to the Richmond Fed monthly Survey of Manufacturing Activity, released Tuesday. The results were modestly positive, compared to July's weak manufacturing activity yet not enough to illustrate a recovery in the sector which is likely being impacted by the ongoing trade war with China.

"The composite index rose from -12 in July to 1 in August, buoyed by increases in the indexes for shipments and new orders," the survey found. "However, the third component, employment, fell. Firms reported increasing capital expenditures and inventories, but the measure of local business conditions was slightly negative. Manufacturers were, however, optimistic that conditions would improve in the next six months.”

The survey indicated that while wage growth continues, firms were having difficulty finding employees with the necessary skills for open positions --- and it anticipates that both of these trends will continue. Also, “many firms saw employment decline while the average workweek increased in August,” according to the survey.

Last week, Fed Chairman Powell, in his Jackson Hole speech, noted that policymakers are monitoring the challenges facing the sector.

"As the year has progressed, we have been monitoring three factors that are weighing on this favorable outlook: slowing global growth, trade policy uncertainty, and muted inflation. The global growth outlook has been deteriorating since the middle of last year. Trade policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the United States. Inflation fell below our objective at the start of the year. It appears to be moving back up closer to our symmetric 2 percent objective, but there are concerns about a more prolonged shortfall" said Powell.

On Tuesday, President Trump called out the Fed, again in a tweet, for policies that are not benefiting the U.S.A.