Calendar › Richmond Fed Manufacturing › 2026-10-27
Richmond Fed Manufacturing -2 vs 0 Est — Backlogs Sink to -21, Selling Prices Climb
Fundamentals · 2026-10-27
Richmond Fed composite manufacturing index -2 in October (vs 0 est, prior -2), a second straight negative month after +4 in August; shipments 0 from -5; new orders -8 from -6; employment 3 from 7; backlog of orders -21 from -10; vendor lead time 18 from 8; capacity utilization -7, unchanged; capital expenditures -12 from -7; local business conditions -8 from -6; prices received growth 5.27% from 4.19%, prices paid 7.12%, flat; six-month expectations fell for shipments (19 from 33), new orders (22 from 32) and capacity (8 from 15); 120-130 firms in the Fifth District.
What It Changes
- The headline missed by two points and did not move. The composite held at -2 against a 0 consensus. Shipments improved to zero, but new orders and hiring weakened.
- The pipeline is thinning. Backlogs fell 11 points to -21, by far the largest move in the survey, and new orders are negative for a second month. Firms are working through orders faster than they are booking new ones.
- Prices are going the other way. Selling-price growth jumped to 5.3% from 4.2% while input-cost growth held at 7.1%, and longer supplier delivery times point to supply strain, not slack. Weak demand and firmer prices together are the mix a hiking Fed watches most closely.
- The outlook dimmed. Expected shipments and new orders stayed positive but fell about 10 points each, and expected capacity use halved.
Impact
- USD — Mixed — softer activity leans dovish, firmer selling prices lean hawkish, and a regional survey rarely moves the dollar against the 10:00 national data released in the same minute.
- The Open listed this at 10:00 alongside Conference Board confidence and new home sales; confidence beat by 10.7 points and set the move.
- US Indices (ES / NQ / YM / RTY) — Slight bearish — falling backlogs and weaker capex plans are a soft signal for industrial earnings, and margin pressure is building where input costs still run above 7%.
- YM and RTY carry the most direct exposure, through industrials and domestic manufacturers.
- Gold (GC) — Neutral — no clear signal on growth or the rate path, with tomorrow's FOMC doing the work.
Inside The Number
The Richmond Fed's composite manufacturing index was -2 in October, unchanged from September and against a 0 consensus (TradingEconomics). The Fed's headline: "Fifth District Manufacturing Activity Remained Flat in October." The composite is a weighted average of shipments (33%), new orders (40%) and employment (27%), so the components tell the story.
Two of the three components weakened. New orders fell to -8 from -6, and with a 40% weight they are the largest drag. Employment fell to 3 from 7, still positive. Shipments rose to 0 from -5, the only improvement. On the weights, -8 in orders and +3 in employment against flat shipments works out to about -2.4, which rounds to the published -2.
Backlogs are the hidden number. The backlog of orders index fell 11 points to -21, the largest change among the current indexes, from -10 in September and -7 in August. A falling backlog with negative new orders means firms are drawing down their order books. That can hold shipments up for a while, which is what October's shipments of zero look like, but it leaves less work booked for the months ahead.
Supply is tightening while demand softens. Vendor lead time rose to 18 from 8, meaning more firms reported slower deliveries from suppliers. Raw materials inventories fell to -2 from 6. Capacity utilization held at -7. Slower deliveries alongside weaker orders usually point to supply constraints, such as tariffs or input shortages, rather than to demand.
Spending plans pulled back. Capital expenditures fell to -12 from -7, equipment and software spending to -8 from -4, and services spending to -19 from -10; capex and services are both below zero for a third straight month. Firms are cutting back on investment, not adding to it.
Prices diverged from activity. Prices paid grew at an average 7.12% over the past 12 months, effectively flat from 7.08%. Prices received rose to 5.27% from 4.19%, the biggest move in the price data. Firms expect both to slow over the next 12 months, to 5.32% for prices paid and 4.30% for prices received, but both expectations are higher than in September (4.73% and 3.84%). The gap between input-cost growth and selling-price growth narrowed to about 1.9 points from 2.9, so firms are passing more of their costs on. Wages stayed elevated at 20, from 17.
The narrative point: factory activity in the Fifth District is flat to soft, with orders and backlogs both falling, but price growth is firming rather than easing. That is the stagflation mix in miniature: weaker demand without lower prices, a day before a Fed decision with a December hike priced at 75-80%.
The Internals
Current conditions, diffusion indexes, seasonally adjusted:
Index · October · September · August · Change · Read
Composite manufacturing index · -2 · -2 · 4 · 0 · Missed 0 consensus
Shipments · 0 · -5 · 11 · +5 · Only component to improve
Volume of new orders · -8 · -6 · 3 · -2 · Second negative month
Number of employees · 3 · 7 · -2 · -4 · Still positive
Backlog of orders · -21 · -10 · -7 · -11 · Largest move in the survey
Capacity utilization · -7 · -7 · 2 · 0 · Unchanged
Vendor lead time · 18 · 8 · 16 · +10 · Slower deliveries
Local business conditions · -8 · -6 · 4 · -2 · Weaker
Capital expenditures · -12 · -7 · -5 · -5 · Third negative month
Equipment and software spending · -8 · -4 · 0 · -4 · Lower
Services expenditures · -19 · -10 · -13 · -9 · Lowest of the three months
Finished goods inventories · 4 · 4 · 3 · 0 · Unchanged
Raw materials inventories · -2 · 6 · 9 · -8 · Turned negative
Wages · 20 · 17 · 26 · +3 · Elevated
Availability of skills needed · -7 · -11 · -13 · +4 · Less tight
Six-month expectations, diffusion indexes:
Index · October · September · August · Change
Shipments · 19 · 33 · 26 · -14
Volume of new orders · 22 · 32 · 32 · -10
Backlog of orders · 7 · 2 · 6 · +5
Capacity utilization · 8 · 15 · 14 · -7
Vendor lead time · 13 · 5 · 10 · +8
Local business conditions · 7 · 10 · 16 · -3
Capital expenditures · 4 · -1 · 4 · +5
Equipment and software spending · 2 · -5 · 2 · +7
Services expenditures · -12 · -18 · -10 · +6
Number of employees · 8 · 8 · 20 · 0
Wages · 49 · 50 · 42 · -1
Availability of skills needed · -7 · -9 · -5 · +2
Price trends, average annual % change, not seasonally adjusted:
Measure · October · September · August · Change
Prices paid, past 12 months · 7.12% · 7.08% · 6.22% · +0.04 pp
Prices received, past 12 months · 5.27% · 4.19% · 4.09% · +1.08 pp
Prices paid, expected next 12 months · 5.32% · 4.73% · 4.34% · +0.59 pp
Prices received, expected next 12 months · 4.30% · 3.84% · 3.69% · +0.46 pp
Gap, paid minus received, past 12 months · 1.85 pp · 2.89 pp · 2.13 pp · -1.04 pp
What The Firms Actually Said
The Richmond Fed's release carries no special questions or firm comments this month, so the expectations and price tables are the layer beneath the headline.
- Expectations cooled, but stayed positive. Expected shipments fell 14 points to 19 and expected new orders 10 points to 22. Both are still well above the current readings, so firms expect improvement, just less of it than a month ago.
- Expected investment turned up. Expected capital expenditures rose to 4 from -1, and equipment and software to 2 from -5, the opposite of the current spending indexes. Firms are cutting now and planning to spend later.
- Hiring plans held, wages stay high. Expected employment held at 8, down from 20 in August, and expected wages stayed near 50, the highest of any expectations index.
- Supply strain is expected to persist. Expected vendor lead times rose to 13 from 5.
- Prices are expected to slow, from a higher base. Firms expect input-cost growth to slow to 5.32% and selling-price growth to 4.30%, but both expectations rose about half a point from September.
Against This Morning's Open
- The Open listed Richmond Fed manufacturing at 10:00 with a 0 consensus against a -2 prior, tagged USD, and put Conference Board confidence as the 10:00 release most likely to move anything.
- It printed -2, two points short, in the same minute as a 10.7-point confidence beat. The Open's framing holds: this was not the number that moved the session.
What This Sets Up
- Next Richmond Fed manufacturing survey — Tuesday 24 November, covering November, on the Richmond Fed's usual fourth-Tuesday schedule.
- Confirms a soft patch: new orders and backlogs negative for a third month, with prices received still above 5%.
- Breaks it: new orders back above zero and backlogs recovering toward -10, which would make October's backlog drop a one-month draw-down.
- Watch prices received. A second month above 5% would say firms are passing costs on faster even as demand softens.
What Is This?
- What it is: The Federal Reserve Bank of Richmond's monthly Fifth District Survey of Manufacturing Activity, based on 120-130 manufacturers in Maryland, Virginia, North Carolina, South Carolina, the District of Columbia and most of West Virginia. Each index is the share of firms reporting an increase minus the share reporting a decrease. The composite is a weighted average of shipments (33%), new orders (40%) and employment (27%). Data other than prices are seasonally adjusted, and the whole series is re-seasonally adjusted every July.
- Why it matters: It is one of the five regional Fed manufacturing surveys published before the national ISM report, alongside Empire State, Philadelphia, Kansas City and Dallas. Its price questions ask firms for an average percentage change, rather than a diffusion index, which makes it one of the more direct reads on factory price pressure.
- How to read it: Zero is the dividing line between more firms reporting increases and more reporting decreases. The composite moves on new orders first, given their 40% weight. Backlogs and vendor lead times are the early signals: falling backlogs mean less work booked ahead, and rising lead times mean supply strain. With a small sample, single-month moves of a few points are often noise; read the three-month trend.
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_For informational purposes only. Not investment advice._