The contraction in manufacturing business has deepened in the Richmond Federal Reserve district with the district business activity index down to minus 13 in April from minus 4 in March and positive 6 in February. Consensus expectations for the Richmond index called for a more modest decline to minus 5.

The three components of the Richmond Fed manufacturing index all declined with shipments down to minus 17 In April from minus 7 in March, new orders down to minus 15 from minus 4, and employment at minus 5 from minus 1.

Other regional manufacturing reports have come in lower than expected so far for April, including the Philly Fed index dropping to minus 26.4. The contraction largely reflects the hit to business from tariffs and anticipation of tariff effects. This is bound to fuel expectations for another decline in the ISM manufacturing index from 49.0 in March and 50.3 in February. These numbers are bound to make the Fed take notice if the downturn accelerates.

The Richmond Fed manufacturing index is expected to show slightly faster contraction in April. After the big miss on the Philly Fed index at minus 26.4 in April versus the expected positive 6.7, risk is to the downside.

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.