Fifth District Factory Growth Moderates, While Investment Outlook Improves Slightly

Manufacturing activity in the Fifth District contracted at the same pace in October after declining in September, with the composite manufacturing index remaining at -2. At the same time, local business conditions also declined, falling from -6 to -8 in October. In line with worsening business conditions, manufacturers are less optimistic about the future, with the outlook for future local business conditions stepping down from 10 to 7. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, the shipments index rose from -5 in September to 0 in October, while the new orders index decreased from -6 to -8. On the other hand, the index for employment stepped down from 7 to 3, while the index for vendor lead times jumped from 8 to 18. At the same time, the average growth rate for both prices paid and prices received accelerated in October.

Looking ahead, firms expected prices paid and prices received to increase at a faster pace over the next 12 months. Expectations for future shipments fell from 33 to 19, while expectations for new orders declined from 32 to 22. Expectations for backlogs stepped up from 2 to 7. Meanwhile, firms’ expectations about equipment and software spending turned positive, rising from -5 to 2. In sum, businesses in the Fifth District are less optimistic about future business conditions but slightly more optimistic about investment plans.