Manufacturing activity in the central Atlantic region "contracted at a less pronounced rate in May after pulling back in April," while expectations were higher, according to the monthly business activity survey conducted by the Federal Reserve Bank of Richmond, as the manufacturing index narrowed to negative 2 from negative 6 in April.

Index readings above zero show expansion, while numbers below zero indicate contraction.

Shipments reversed to positive 8 from negative 9, the Fed reported. Volume of new orders slid to negative 10 from negative 8, while the backlog of orders index narrowed to negative 11 from negative 21.

The capacity utilization index improved to negative 6 from negative 18, while the vendor lead time index rose to positive 2 from negative 2. The number of employees index fell to negative 3 from positive 3, while the average workweek index was at negative 6 after a negative 3 reading last month, and the wages index slid to 6 from 12.

As for future outlook (six months from now), the shipments index was 22, off from 25 last month, while the volume of new orders index rose to 28 from 26, and backlog of orders gained to 16 from 10. Capacity utilization jumped to 20 from 15, the vendor lead time index increased to 8 from zero, the number of employees index rose to 4 from zero, while the average workweek index was at positive 3, up from negative 2 the previous month, and the wages index was 22, down from 30 last month. The capital expenditures index was 9 after 8 last month.

The finished goods inventories index dipped to 6 from 9, while the raw materials index fell to 7 from 18 the previous month.

The current trend in prices paid slid to 1.00 in May from 1.27 in April, while growing to 0.24 from 0.15 for prices received. The expected trend for the next six months rose to 1.91 from 1.85 for prices paid, and rose to 1.67 from 1.26 for prices received.

All firms surveyed are located within the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.

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