Those seeking early indicators of an imminent recession just got it courtesy of the Richmond Fed Manufacturing Index, which tumbled from 14 in November to -8, crushing expectations of a modest rebound to 15, weighed down by drops in the indexes for new orders and shipments.

With analysts expecting the Richmond Fed to print between 12 and 17, the -8 print was a 20 sigma event relative to expectations.

The internals were an unmitigated disaster, with the shipments index print of -25 was its lowest reading since April 2009 even as the third component, the index for employment, rose. Additionally, respondents indicated a deterioration in local business conditions, as this index fell to −25, its lowest reading on record. Other metrics were mostly dismal:

  • Shipments fell to -25 after 12 the prior month
  • New order volume slowed to -9 after 17 the prior month
  • Order backlogs fell to -18 after 15 the prior month
  • Capacity utilization slowed to -16 after 9 the prior month
  • Inventory levels of finished goods increased to 13 after 2 last month
  • Inventory levels of raw goods rose to 15 after 5 last month

The survey results suggested employment growth among many manufacturing firms in December, but firms continued to struggle to find workers with the necessary skills. Respondents expected this problem to continue in the coming months but anticipated continued employment growth as well.

Meanwhile margins continued to get squeezed as both prices paid and prices received by manufacturing firms grew in December, however the growth of prices paid continued to outpace growth of prices received, indicating that profit margins are becoming increasingly squeezed.

And the scariest chart: the monthly change in the composite index was the biggest drop on record.

Was this the first canary in the coalmine to signal the imminent US recession? Look for other high frequency indicators to confirm the sudden slowdown in the US economy.