Mirroring many of the other regional surveys, the Richmond Federal Reserve Bank said that manufacturing activity contracted in August. The composite index for manufacturing fell from -1 in July to -10 in August, reflecting reduced shipments, new orders, capacity utilization, and average workweek. The number of employees and average wages were essentially unchanged, but positive, and inventories continued growing.

Pricing pressures remain a concern, with raw material prices growing at an annual rate of 4.16 percent, according to the respondents. Meanwhile, the prices that manufacturers receive for their goods edged up to 1.46 percent in August, from 1.18 percent in July. Still, this suggests that manufacturers are not able to pass along much of the higher costs that they are facing.

Moving forward, manufacturing activity in the Richmond region remains positive, but businesses are less optimistic than earlier in the year. For instance, the index for expected new orders has fallen from 44 in June to 17 in August. Similar drops are seen with shipments, capacity utilization, employment and capital expenditures.

Overall, this survey shows that the economic situation has deteriorated, with the recovery stalling out and manufacturers contracting. This was seen in the New York and Philadelphia regions last week, and we are seeing it today with this Richmond survey, unfortunately.

Chad Moutray is chief economist, National Association of Manufacturers.