Economic Data and Growth

Manufacturing activity in the Fifth District contracted in February and at a faster pace than the previous month, with the composite manufacturing index decreasing from -6 to -10. At the same time, the local business conditions index declined from -8 in January to -15 in February. Despite current weakness, manufacturers are more optimistic about the future, with the outlook for future local business conditions rising from 19 in January to 22 in February. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments and new orders remained negative and contracted at a faster pace, falling from -5 to -13 and from -6 to -9, respectively. The indexes for employment and vendor lead times ticked down, moving from -6 to -7 and from 0 to -1, respectively. Meanwhile, the share of firms reporting backlogs worsened, edging down from -13 to -14. On the other hand, the average growth rate of prices paid and prices received slowed in February.

Looking ahead, firms expect both price indexes to increase in the next 12 months but at a slower pace than forecasted in January. Expectations for future shipments and new orders remained positive but ticked down from 34 to 29 and from 36 to 35, respectively. Expectations for backlogs grew from 4 to 6. Meanwhile, firms’ expectations about equipment and software spending turned positive, increasing from -3 to -2. In sum, businesses in the Fifth District remained optimistic about future business conditions and investment plans.