By Xavier Fontdegloria
Manufacturing activity across the central Atlantic region of the U.S. gained further steam in June amid increasing new orders, data from a survey from the Federal Reserve Bank of Richmond showed Tuesday.
The Fifth District Survey of Manufacturing Activity's composite index came in at 22 in June, up from 18 in May. The reading beats the forecasts from economists polled by The Wall Street Journal, who expected the indicator to stand at 18.
The index is compiled by surveying manufacturing firms across the Fifth Federal Reserve District, which encompasses the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia. Positive readings signal expansion, while negative readings indicate contraction.
Manufacturing activity in the area has expanded since July 2020. The industrial sector is expanding strongly across the U.S. amid robust demand, but supply-chain woes and labor shortages are constraining output and factories can't keep up with orders.
All three component indexes which form the headline figure--shipments, new orders and employment--remained in expansion territory in June, the report said.
The increase was driven by the new orders index, which rose sharply to 35 in June from 18 in May. The shipments index decreased to eight from 12 the previous month, the data showed.
The employment index dropped to 19 from 25, signaling increasing employment in June but at a smaller pace compared with May. "Firms struggled to find workers with the necessary skills, a difficulty that manufacturers expected to continue," the Richmond Fed said.
Supply constrains continued to weigh on output growth. "Manufacturers continued to report shrinking inventories, growing order backlogs and lengthening vendor lead times," the report said.
Signs of inflation persisted, as the average growth rates of both prices paid and prices received declined slightly but remained elevated. Respondents expected price growth to slow in the near future, the data showed.
The future index for shipments increased sharply to 50 from 39 in May, while the future new orders index remained unchanged at 38. Expectations for employment in the next six months increased at a faster pace than in May.
Write to Xavier Fontdegloria at firstname.lastname@example.org
(END) Dow Jones Newswires
June 22, 2021 10:34 ET (14:34 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.