US 5th District Service Sector Downturn Eases Slightly

The Fifth District Service Sector Survey indicated a fourth consecutive monthly contraction in activity in February 2026, the steepest in the current stretch, according to the Federal Reserve Bank of Richmond. The revenues index decreased to -8 from -3 and the demand index fell to -3 from 2. Expectations for future revenues (35 vs 34) and demand (28 vs 32) remained firmly in positive territory. The local business conditions index edged down to -10 from -6 in January, while the future local business conditions index rose to 16. The current employment index decreased to 0 in February from 5 in January, and the forward-looking employment index decreased to 15 from 20. The wages index inched down to 17 from 20 and firms continued to expect to increase wages over the next six months. The average growth in prices paid rose notably, while prices received edged up slightly. Firms expect price pressures on inputs to ease over the next 12 months, with prices received seen holding steady.

The Fifth District Service Sector Survey revealed a third consecutive monthly contraction in activity in January 2026, albeit at a slower pace, according to the Federal Reserve Bank of Richmond. The revenues index inched up to -3 from -6, while the demand index increased to 2 from -3. The current employment index was unchanged at 5 in January, while the forward-looking employment index rose to 20 from 14. The wages index increased slightly to 20 from 17 and firms continued to expect to increase wages over the next six months. Average prices paid declined noticeably in January, while prices received increased modestly. Firms expect price growth to remain broadly stable over the next 12 months. Meanwhile, expectations strengthened, with future revenue and demand indexes moving further into positive territory. The local business conditions index increased slightly to -6 in January from -11 in December, while the future local business conditions index was unchanged at 7.

The Fifth District Service Sector Survey showed a second consecutive contraction in activity in December 2025, according to the Federal Reserve Bank of Richmond. The revenues index inched down to -6 from -4 while the demand index decreased to -3 from 4. Expectations for future revenues and demand remained solidly in positive territory. The local business conditions index increased slightly to -11 from -15 in November, and the future outlook inched up to 7 from 4. The current employment index increased to 5 in December from 1 in November, while the forward-looking index fell to 14 from 24. The wages index increased to 17 from 12 and firms continued to expect to increase wages over the next six months. Turning to prices, the average growth rate of prices paid increased notably in December, while growth in prices received ticked up. Firms expected growth in prices paid to moderate and growth in prices received to decrease slightly over the next 12 months.