Factory output in the U.S. central Atlantic region fell further into negative territory in August on slower growth in new orders and shipments, the Federal Reserve Bank of Richmond said Tuesday.
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The Richmond Fed's composite index of factory activity in its district slumped to -10 from -1 in July.
The reading, which was below many economists' expectations, reinforced the view that growth at U.S. factories could be stalling, knocking out one of the legs of the economic recovery.
"Manufacturing sectors have more or less run out of steam," said Millan Mulraine, a macro strategist at TD Securities in New York.
Last week, the Philadelphia Fed's factory survey showed output plunged in the Mid-Atlantic region during August, dampening hopes for a quick revival in growth.
Any reading below zero in the Richmond Fed index indicates contraction in the region's manufacturing. The survey covers factories in the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia.
The Richmond Fed data, together with the Philly Fed reading as well as a decline in factory output in the New York area during August, might be a sign the larger national survey from the Institute for Supply Management will also be weak.
"It's not a good picture right now. You have good odds of having the ISM under 50," said Tom Porcelli, U.S. economist at RBC Capital Markets in New York.
An ISM reading under 50 would point to a decline in output.
The Richmond index is a measure of factory shipments, new orders and employment in the region.
Most of the Richmond Fed's measures of manufacturing pointed to softer activity, from shipments and capacity utilization to backlogs of orders.