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Manufacturing activity in the Fifth District contracted in June, but at a slower pace than the previous month, with the composite manufacturing index ticking up from -9 to -7. Additionally, the local business conditions index improved but remained in negative territory, rising from -25 in May to -20 in June. On the other hand, manufacturers are more pessimistic about the future, with the outlook for future local business conditions slipping from -6 in May to -11 this month. The Fifth Federal Reserve District consists of Virginia, Maryland, the Carolinas, the District of Columbia and most of West Virginia.

Among its components, shipments and new orders improved but remained negative, rising from -10 to -3 and from -14 to -12, respectively. Employment soured slightly, falling from -2 to -5, indicating hiring decreased at a faster rate in June. The vendor lead time index remained largely unchanged at 16, after jumping from 1 to 15 in May. The share of firms reporting backlogs edged down from -19 to -20. The average growth rates of prices paid and prices received both jumped in June.

Looking ahead, firms still expect both price indexes to rise in the next 12 months but at a slower pace than forecasted in May. Expectations for future shipments ticked up from 2 to 4, and new orders rose out of negative territory from -3 to 5. Expectations for backlogs also improved, moving from -27 to -21. Meanwhile, firms continued a cautious approach to equipment and software spending, with expectations worsening from -13 to -19. Expectations for spending on capital expenditures also deteriorated to -20. In sum, businesses in the Fifth District are cautiously optimistic about prospects for future growth but are still avoiding making new investment plans.