By Maria Martinez

Factory activity in the U.S. central Atlantic region contracted in June for the second consecutive month as demand faltered, according to a survey from the Federal Reserve Bank of Richmond released Tuesday.

The Fifth District Survey of Manufacturing Activity's index decreased to minus 19 in June from minus nine in May, posting the lowest reading since May 2020. Economists polled by The Wall Street Journal expected the indicator to come in at minus five.

The index signals that factory activity declined over the month, as a negative reading indicates contraction.

The index is compiled by surveying manufacturing firms across the Fifth Federal Reserve District, which includes the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia.

Two of the three component indexes which form the composite indicator dropped further into negative territory: new orders and shipments.

The new orders index declined to minus 38 in June from minus 16 in May, while the shipments index fell to minus 29 from minus 14 the previous month, pointing to weakening demand for goods.

The employment index rose to 23 from eight. The wage index remained elevated, despite a minor downward shift, indicating that a large share of firms continue to report increasing wages.

On a positive note, there was some indication of supply-chain improvement as the indexes for vendor lead time and order backlogs both decreased in June from record highs earlier in the year, the Richmond Fed said.

The average growth rate of prices paid decreased somewhat in June. However, firms reported higher average growth in prices received in June.

Manufacturers in the area turned more pessimistic about business conditions in the next six months, with the index gauging short-term expectations falling to minus 19 in June from minus 13 in May, the Richmond Fed said.

Write to Maria Martinez at maria.martinez@wsj.com

(END) Dow Jones Newswires

June 28, 2022 10:31 ET (14:31 GMT)