The Federal Reserve Bank of Richmond released its reading on manufacturing, showing a sharp drop in August. The Manufacturing Index fell to 0 in August, after having risen by seven points to 13 in July.

Investors are looking for any signs of life that they can find right now, and this seems to be catching up one of the stronger prior readings to weaker readings in other districts. Bloomberg was seeing the consensus estimate falling only to 10 in August, so a reading of 0 is far worse than expected.

Shipments dropped sharply, with that index falling 20 points to end at -4 in August. The index for new orders fell 16 points to finish at 1 in August, and manufacturing employment remained steady at 1.

Backlog also fell in August by a whopping 25 points down to -15. Additional data were released as follows:

• The capacity utilization index also fell, down 14 points to a reading of -5.
• Vendor lead time lengthened slightly, with that indicator gaining five points to end at 9.
• Finished goods inventories rose at the same pace as last month, holding steady at 24.
• Raw materials inventories increased at a faster pace this month, rising eight points to 24.

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The Richmond Fed report on manufacturing said:

Shipments and order backlogs decreased, while new orders flattened this month. Manufacturing hiring softened this month; however, average wages continued to increase at a moderate pace. Prices of raw materials rose more slowly in August, while prices of finished goods grew slightly faster compared to last month.

Despite the soft current conditions, producers remained optimistic about future business conditions. Expectations were for solid increases in shipments and in the volume of new orders in the six months ahead, with increased capacity utilization. In addition, manufacturers looked for rising backlogs and longer vendor lead times.

Producers expected faster employment growth and solid growth in wages during the next six months. Survey participants looked for moderate growth in the average workweek. Looking ahead, manufacturers looked for faster growth in prices paid and prices received.

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