The Richmond Fed manufacturing composite index showed more deterioration as it dropped to minus 15 in May from minus 10 in April and minus 5 in March. The index came in at the low end of expectations.

New orders, the forward-looking indicator, fell to minus 29 in May from minus 20 in April and minus 11 in March. Shipments dipped to minus 13 from minus 7 in April and 2 in March. Employment edged up to 5 in May from 0 in April and minus 5 in March. Wages remained somewhat elevated at 17 in May versus 25 in April and 27 in March.

Prices paid eased to 4.95 in May from 7.57 in April and 6.24 in March. Prices received registered 5.39 in May compared with 5.63 in April and 5.59 in March.

Richmond Fed's manufacturing index in May is not expected to emerge from four prior months of contraction, at a consensus minus 8 versus minus 10 in April.

This survey tracks business conditions in the Richmond Fed's manufacturing sector. The headline index is a composite of the new orders, shipments, and employment indexes.

Investors need to monitor the economy closely because it usually dictates how various types of investments will perform. By tracking economic data such as the regional Fed surveys, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth so that it won't lead to inflation. These surveys give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since manufacturing is a major sector of the economy, this report has a big influence on market behavior.