Factory activity across the Federal Reserve’s Fifth District contracted sharply in July, with the Richmond Fed’s composite manufacturing index dropping to –20 from a revised –8 the prior month. Economists surveyed by Bloomberg had expected a modest decline to –2, making the latest reading the weakest since the pandemic-era slump of 2020. All three components of the gauge deteriorated. Shipments fell to –18 from –5, new orders slid to –25 from –12, and the employment measure dropped to –16 from –6, signaling broad weakness in demand and hiring. The index for local business conditions improved to –11 but remained in negative territory, while firms reported slightly slower growth in prices paid and received. Forward-looking indicators were mixed: expectations for local business conditions edged higher to –2, yet firms anticipated softer hiring over the next six months. The report suggests manufacturing in the Mid-Atlantic and parts of the Southeast continues to struggle amid higher borrowing costs and tepid order books, adding to evidence of uneven momentum in the broader U.S. industrial sector.