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Manufacturing activity in the Fifth District deteriorated in July, at a faster pace than the previous month, with the composite manufacturing index dropping from -8 to -20. Meanwhile, the local business conditions index improved but remained in negative territory, rising from -17 in June to -11 in July. Additionally, manufacturers are still pessimistic about the future, but less so than in the prior month, with the outlook for future local business conditions rising from -7 in June to -2 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, new orders and employment all remained negative and contracted at a faster pace than in June, dropping to -18, -25 and -16, respectively. The vendor lead time index decreased from 15 to 7. Meanwhile, the share of firms reporting backlogs also worsened, falling from -18 to -30. On the other hand, the average growth rate of prices paid and prices received both declined some.

Looking ahead, firms still expect both price indexes to rise in the next 12 months at a slightly faster pace than forecasted in June. Expectations for future shipments increased from 6 to 11, and new orders ticked up from 6 to 9. Expectations for backlogs also improved, moving from -17 to -9. Meanwhile, firms maintained a cautious approach to equipment and software spending. Expectations for capital expenditures also worsened to -19 from -17. In sum, businesses in the Fifth District are cautiously optimistic about prospects for future growth but are still avoiding making new investment plans.