Economic Data and Growth

Manufacturing activity in the Fifth District contracted in January, but at a slightly slower pace than the previous month, with the composite manufacturing index inching up from -7 to -6. At the same time, the local business conditions index improved from -9 in December to -8 in January. Despite current weakness, manufacturers are more optimistic about the future, with the outlook for future local business conditions rising from 16 in December to 19 in January. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments remained negative but contracted at a slower pace, increasing from -11 to -5. New orders improved slightly, ticking up from -8 to -6 in January. Employment worsened, falling from -1 to -6, and the vendor lead time index declined from 9 to 0. Meanwhile, the share of firms reporting backlogs worsened, decreasing from -7 to -13. The average growth rate of prices paid quickened, while average growth of prices received slowed in January.

Looking ahead, firms expect both price indexes to increase in the next 12 months, with both rising at a slightly faster pace than forecasted in December. Expectations for future shipments climbed from 28 to 34, while new orders increased from 27 to 36. Expectations for backlogs inched down from 5 to 4. Meanwhile, firms’ expectations about equipment and software spending turned negative, declining from 0 to -3. At the same time, expectations for capital expenditures improved but remained negative, increasing from -6 to -4. In sum, businesses in the Fifth District remain optimistic about future business conditions but pessimistic about future investment plans.