The Richmond Fed Manufacturing Shipments Index gauges the volume of goods shipped by manufacturers in the Fifth District, covering Virginia, Maryland, North Carolina, South Carolina, and parts of West Virginia and D.C. The November 2025 reading of -14 marks a significant downturn from October’s +4 and is well below the 12-month average of approximately -5. This signals a notable contraction in factory shipments, suggesting weakening demand or supply chain disruptions in the region’s manufacturing base.

Drivers this month

• Declining new orders and backlogs amid softening domestic demand.
• Rising input costs and logistical bottlenecks affecting shipment volumes.
• Geopolitical tensions impacting export orders, particularly in automotive and aerospace sectors.

Policy pulse

The sharp drop in shipments adds pressure on the Federal Reserve to maintain a cautious stance. With inflation still above target but growth signals weakening, the Fed faces a delicate balance between curbing inflation and avoiding a deeper manufacturing slump.

Market lens

Following the print, the US dollar index (DXY) weakened slightly, while 2-year Treasury yields fell by 8 basis points, reflecting increased expectations of a slower pace of rate hikes. Equity markets showed mixed reactions, with industrial stocks underperforming.

The Richmond Fed Manufacturing Shipments Index complements other core macroeconomic indicators such as the ISM Manufacturing PMI, industrial production, and durable goods orders. The November reading contrasts with the national ISM Manufacturing PMI, which held steady at 48.50, still below the 50 expansion threshold but less severe than the Richmond Fed’s regional data.

Monetary Policy & Financial Conditions

Financial conditions have tightened over the past year, with the Federal Reserve raising the federal funds rate to a 5.25%-5.50% range. The shipments index’s decline reflects the lagged impact of these hikes on manufacturing activity. Credit spreads have widened modestly, and bank lending standards have tightened, further constraining capital availability for manufacturers.

Fiscal Policy & Government Budget

Recent fiscal measures, including infrastructure spending and targeted manufacturing incentives, have yet to offset the broader slowdown. The federal budget deficit remains elevated, limiting scope for additional stimulus that could bolster manufacturing demand in the near term.

External Shocks & Geopolitical Risks

Heightened geopolitical risks, including trade tensions with China and supply chain disruptions linked to Eastern Europe conflicts, have exacerbated shipment declines. Export-dependent manufacturers in the Fifth District are particularly vulnerable to these shocks.

Historical comparisons highlight the volatility of the shipments index in 2025. Earlier in the year, readings fluctuated between -20 and +12, reflecting uneven demand and supply chain challenges. The current print suggests the sector is entering a more pronounced downturn phase.

Market lens

Immediate reaction: The US dollar index dipped 0.30%, while 2-year Treasury yields declined 8 basis points, reflecting increased market expectations for a slower Fed tightening cycle. Industrial sector ETFs saw a 1.20% decline in early trading.

Looking ahead, the Richmond Fed Manufacturing Shipments Index suggests several scenarios for the US manufacturing sector and broader economy:

Bullish scenario (20% probability)

• Supply chain normalization and easing geopolitical tensions boost shipments.
• Fiscal stimulus and infrastructure projects accelerate demand.
• Fed signals pause or reduction in rate hikes, improving financial conditions.

Base scenario (55% probability)

• Manufacturing shipments remain subdued but stabilize near current levels.
• Inflation moderates gradually, allowing the Fed to slow tightening.
• Global trade frictions persist but do not worsen materially.

Bearish scenario (25% probability)

• Further deterioration in shipments due to renewed supply chain shocks or geopolitical escalation.
• Fed maintains aggressive rate hikes, deepening manufacturing contraction.
• Credit conditions tighten sharply, curbing capital investment.

Overall, the index’s sharp decline signals caution for manufacturing-related sectors and suggests downside risks to GDP growth in the near term. Policymakers and market participants should monitor upcoming regional Fed reports and national manufacturing data for confirmation of this trend.

The November 2025 Richmond Fed Manufacturing Shipments Index’s unexpected plunge to -14 highlights the fragility of the US manufacturing recovery. Despite pockets of resilience, the sector faces headwinds from tighter monetary policy, geopolitical uncertainty, and lingering supply chain issues. This regional data aligns with broader signals of slowing industrial activity and raises questions about the durability of recent economic expansions.

Investors should weigh the risks of a manufacturing slowdown against potential stabilizing factors such as fiscal support and easing inflation. The Federal Reserve’s next moves will be critical in shaping the trajectory of manufacturing shipments and the broader economy.

Data sourced from the Sigmanomics database, cross-verified with Federal Reserve releases and national economic indicators.

Since 2020, the Richmond Fed Manufacturing Shipments Index and the DOW have shown a moderate positive correlation (r ≈ 0.45). Periods of shipment contraction often precede or coincide with DOW pullbacks, reflecting the index’s role as a leading indicator of industrial sector health. For example, the sharp shipment declines in early 2025 aligned with a 7% correction in the DOW, underscoring the index’s predictive value for equity market performance.

Takeaway: The November 2025 Richmond Fed Manufacturing Shipments Index’s sharp fall to -14 signals a renewed contraction in regional manufacturing, underscoring downside risks to US industrial growth and complicating the Federal Reserve’s policy outlook.