Richmond Fed manufacturing index edges up as local business conditions turn positive

Richmond Fed Survey of Manufacturing Activity: Manufacturing activity in the Fifth District rose at a slightly faster pace in July after moving down in June, with the composite manufacturing index ticking up from 4 to 5. At the same time, local business conditions turned positive, climbing from -1 to 10 in July. Despite a strengthening of business conditions, manufacturers are slightly less optimistic about the future, with the outlook for future local business conditions declining from 22 to 19. The Fifth District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments rose from 4 in June to 8 in July, while new orders stepped down from 8 to 5. The index for employment turned positive, rising from -1 to 2, while the index for vendor lead times improved from 12 to 17. Meanwhile, the share of firms reporting backlogs inched up from 3 to 4. At the same time, the average growth rate of both prices paid and prices received slowed in July.

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 36 to 33, while expectations for new orders stepped down from 33 to 31. Expectations for backlogs fell from 13 to 6. Meanwhile, firms’ expectations about equipment and software spending turned negative, moving down from 7 to -5. In sum, businesses in the Fifth District are less optimistic about future business conditions and future investment plans.