U.S. Mid-Atlantic Manufacturing Activity Strengthens in July -- Richmond Fed - MarketWatch

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By Maria Martinez

Manufacturing activity across the central Atlantic region of the U.S. gained further steam in July, 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 27 in July, up from 26 in June. The reading beats the forecasts from economists polled by The Wall Street Journal, who expected the indicator to stand at 21.5.

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.

The rise in the composite index was driven by increases in the shipments and employment indexes, while new orders index declined, but remained in expansionary territory in July, the report said.

The shipments index rose to 21 from 15 the previous month, the data showed.

The employment index jumped to 36 in July from 23 in June, signaling increasing employment. Firms "struggled to find workers with the necessary skills," a difficulty that manufacturers expected to continue in the next six months, the Richmond Fed said.

However, the new orders index dropped to 25 from 36 in June.

The indexes for inventories of raw materials and of finished goods declined, as both of these indexes hit record lows, and vendor lead times continued to lengthen, the report said. Manufacturers were optimistic that business conditions would improve in the coming months.

Signs of inflation persisted, as the average growth rates of both prices paid and prices received increased in July. Respondents expected price growth to slow in the near future, the data showed.

The future index for shipments decreased to 41 from 46 in June and the future new orders index fell to 30 from 35 in June. However, expectations for employment in the next six months increased to 53 in July from 48 in June.

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

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