The latest survey from the Federal Reserve Bank of Richmond revealed on Tuesday that the U.S. fifth district's manufacturing activity continued to expand in August, albeit at a slower pace than in July.

According to the report, the composite manufacturing index dropped from 27 in July to 9 in August but remained in expansionary territory, as all three component indexes - shipments (at 6 in August, down from 21 in July), new orders (at 5, down from 25), and employment (at 18, down from 36) - declined steeply but remained positive.

The August print was the lowest since July 2020 and well below economists' forecast of 25. A reading above 0 signals expansion, while a reading below 0 indicates contraction.

Manufacturers also reported that vendor lead times continued to increase and inventories remained low, but, overall, they were optimistic that conditions would improve in the next six months. In addition, the average growth rate of prices paid by survey respondents fell slightly in August, while that of prices received increased. Firms also forecast the price growth to slow over the next year, the Richmond Fed noted.