The Richmond Fed composite index for manufacturing increased slightly to -7 in June from -9 in May, though it remained negative. The shipments index rose to -3, and new orders improved to -12, while the employment index fell from -2 to -5. Local business conditions remained negative but progressed from -25 to -20. However, future local business conditions worsened to -11 from -6. Future shipments and new orders indexes showed improvement, rising to 4 and 5, respectively. Vendor lead time index advanced to 16, while the backlog of orders index decreased from -19 to -20.

In terms of prices, both paid and received growth rates rose in June, with firms predicting more stability in prices paid and expecting prices received growth to increase over the next year. The services index, although negative, saw revenues improve from -11 to -4, and demand slightly increased from -8 to -7. Future revenues and demand indexes made gains, reaching 20 and 13, respectively. Local business conditions edged up from -18 to -16, while future conditions rose from -18 to -11. Employment within the services sector improved, with the current and future employment indexes rising slightly, while the wages index dipped to 19. Overall, despite improvements, both sectors remained in negative territory.

Richmond Area Manufacturing

The composite index for Richmond-area manufacturing, while no longer falling as sharply, remained below zero, indicating that production activity still lags. Shipments and new orders also stayed negative, though they softened their declines. This suggests the sector is still contending with weak demand and sluggish output. Employment figures, particularly the drop to -5, make clear that hiring remains restrained, possibly due to uncertain production needs or cautious sentiment among employers.

Expectations for future business activity expanded in some areas—shipments and new orders, for instance—but became more downbeat for local conditions. A worsened outlook for the local economy, now at -11 from -6, reveals growing concern about the broader environment in which these manufacturers operate. It’s not difficult to infer that participants are more optimistic within their own operations, but uneasy about the wider regional demand.

We took particular note of the vendor lead time index increasing to 16. That makes clear that suppliers are taking longer to deliver inputs, a development which tends to indicate residual constraints in logistics or more complex supply chains returning. At the same time, the continued decline in the backlog of orders underscores that firms are catching up on older commitments without fresh volume coming in fast enough to sustain momentum.

Pricing And Economic Signals

Price-related readings offered a nuanced picture. Businesses reported higher growth in both prices paid and received. Yet their forecasts point to a period of steadier cost pressures ahead and even stronger intentions around passing those along. That could bring a controlled margin environment for the time being.

In the services sector, conditions echoed those of manufacturers, though cautiously firmer. The revenue metric stayed negative but narrowed, as did the demand reading. These movement imply that while activity hasn’t recovered fully, there are signs it’s trying to claw its way back. The projected revenue and demand upturns—now both in healthy positive ranges—represent a more confident mood among service providers looking ahead.

The broader economic signals—like slight gains in future sentiment and hiring intentions—hint at an emerging sense of balance after a prolonged period of contraction. Employment did tick upward in this space, and though the wage index dipped, the read at 19 remains elevated by historical standards. Wage pressures remain, but perhaps they’re levelling off.

We observe that the report points to a moment of transition. Activity is not booming, but it’s also not deteriorating at the pace seen a few months ago. Hope is emerging in forward-looking indicators, though it’s not yet matched by actual figures. For those of us making decisions based on timing and volatility, the separation between current hardship and future optimism becomes a key factor to watch.

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