Economic Data and Growth

Manufacturing activity in the Fifth District rose at a faster pace in May after moving up in April, with the composite manufacturing index increasing from 3 to 13. At the same time, the local business conditions index decreased from 10 to 5 in May. Despite growth of current business conditions weakening, manufacturers are more optimistic about the future, with the outlook for future local business conditions climbing from 3 in April to 17 in May. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments turned positive, rising from -2 in April to 16 in May, while new orders advanced from 8 to 17. The index for employment stepped up from 0 to 3, while the index for vendor lead times stayed the same at 14. Meanwhile, the share of firms reporting backlogs increased from 0 to 4. At the same time, the average growth rate of both prices paid and prices received slowed in May.

Looking ahead, firms expressed an expectation that prices paid would increase at a slower pace over the next 12 months, while prices received would rise at a faster pace. Expectations for future shipments and new orders both strengthened, moving from 21 to 35 and from 26 to 36, respectively. Expectations for backlogs jumped from 0 to 10. Meanwhile, firms’ expectations about equipment and software spending turned positive, stepping up from -5 to 3. In sum, businesses in the Fifth District are more optimistic about future business conditions and future investment plans.