Fifth District Factory Growth Eases, While Investment Outlook Improves

Manufacturing activity in the Fifth District rose at a slower pace in August after ticking up in July, with the composite manufacturing index edging down from 5 to 4. At the same time, local business conditions stepped down but remained positive, declining from 10 to 4 in August. In line with a weakening of business conditions, manufacturers are slightly less optimistic about the future, with the outlook for future local business conditions decreasing from 19 to 16. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments rose from 8 in July to 11 in August, while new orders stepped down from 5 to 3. The index for employment turned negative, falling from 2 to -2, while the index for vendor lead times edged down from 17 to 16. At the same time, the average growth rate of both prices paid and prices received accelerated in August.

Looking ahead, firms expected that prices paid and prices received would increase at a slower pace over the next 12 months. Expectations for future shipments decreased from 33 to 26, while expectations for new orders inched up from 31 to 32. Expectations for backlogs stayed the same at 6. Meanwhile, firms’ expectations about equipment and software spending turned positive, moving up from -5 to 2. In sum, businesses in the Fifth District are slightly less optimistic about future business conditions and more optimistic about future investment plans.