After slower growth in the previous two months, manufacturing activity in the Fifth District showed renewed robust growth in February, with the Richmond Fed Manufacturing Index jumping from January's 14 to 28, the second highest value on record. Far surpassing consensus analysts' expectations calling for a modest increase of 2 points, the sharp acceleration in the sixteenth consecutive monthly expansion of manufacturing in the Fifth District was driven by increases in shipments, up 16 points to 31, new orders, up 11 points to 27, and the number of employees, up 15 points to 25.
But almost all of the components making up the index indicated a vigorous pickup in manufacturing activity, including the backlog of orders, up 13 points to 18, capacity utilization, up 19 points to 32, and capital expenditures, up 10 points to 28.
On the employment front, in addition to the increase in the number of employees, the average workweek in Fifth District manufacturing companies lengthened as well, with the component up 26 points to 28. But wages showed only a point improvement to 23 and available skills was down 7 points to a minus 17, indicating greater difficulty in finding skilled workers.
A sizeable pickup in inflation for both prices paid and prices received was reported, with each rising at the highest rate since April 2017. Businesses expect prices to continue to rise at the accelerated pace in the near future.
The acceleration in the growth of business activity as well as prices seen in today's survey report will be added to the evidence calling for further tightening by the Fed.