Fifth District Manufacturing Slows, but Future Outlook Improves

Manufacturing activity in the Fifth District rose at a slower pace in June after moving up in May, with the composite manufacturing index decreasing from 13 to 4. At the same time, local business conditions turned negative, moving down from 5 to −3 in June. Despite a weakening of current business conditions, manufacturers are more optimistic about the future, with the outlook for future local business conditions rising from 17 to 23. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments fell from 16 in May to 3 in June, while new orders stepped down from 17 to 9. The index for employment turned negative, decreasing from 3 to −1, while the index for vendor lead times inched down from 14 to 13. Meanwhile, the share of firms reporting backlogs stayed the same at 4. At the same time, the average growth rate of both prices paid and prices received accelerated in June.

Looking ahead, firms expressed an expectation that prices paid and prices received would increase at a faster pace over the next 12 months. Expectations for future shipments rose from 35 to 38, while expectations for future new orders weakened, declining from 36 to 32. Expectations for backlogs moved up from 10 to 13. Meanwhile, firms’ expectations about equipment and software spending stepped up from 3 to 7. In sum, businesses in the Fifth District are more optimistic about future business conditions and future investment plans.