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Surveys of Business Conditions

May 23, 2023

Fifth District service sector activity remained soft in May, according to the most recent survey by the Federal Reserve Bank of Richmond. The revenues and demand indexes increased, but remained negative at −10 and −5, respectively. Expectations for future revenue and demand also improved, with the revenue expectations index edging up to 0 and the index for demand expectations rising to 1. Further, the index for current local business conditions rose from −27 in April to −17 in May. However, the index for expected local business conditions did not improve, registering at −20.

Each of the three spending indexes edged up slightly, with the services expenditures index rising the most, from −5 in April to 3 in May. All three spending expectations indexes were positive in May, suggesting that many firms expect spending to increase over the next six months.

The employment index rose to 0 in May, ending its steady decline since the beginning of the year. Firms continued to report wage increases. Over the next six months, many firms expect to continue hiring and anticipate improvement in their ability to find workers with the necessary skills. Most firms plan to continue increasing wages.

The average growth in prices paid decreased notably in May, while the growth rate of prices received decreased somewhat. Firms expect both growth rates to moderate over the coming year.

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