According to the Federal Reserve Bank of Richmond, the Fifth District Service Sector Survey showed a fourth consecutive monthly contraction in activity in February 2026, marking the sharpest decline in the current downturn. The revenues index fell to -8 from -3, while the demand index slipped to -3 from 2.
Despite the current weakness, expectations remained solidly positive: the index for future revenues ticked up to 35 from 34, and the index for future demand eased slightly to 28 from 32. The local business conditions index declined to -10 from -6 in January, but the index for expected local business conditions improved to 16.
Labor market indicators softened. The current employment index fell to 0 in February from 5 in January, and the index for expected employment over the next six months declined to 15 from 20. The wages index edged down to 17 from 20, although firms continued to anticipate raising wages over the coming six months.
On the price side, average growth in prices paid rose notably, while prices received increased only slightly. Looking ahead over the next 12 months, firms expect input price pressures to ease, with prices received projected to remain broadly stable.
