Manufacturing activity in the Fifth District saw robust growth in May, with the Richmond Fed Manufacturing Index rising sharply to 16 after plunging into contraction territory with a minus 3 reading in April. Leading the stronger than expected rebound in May were shipments, up 23 points to 15, new orders, up 25 points to 16, capacity utilization, up 23 points to 19, and the number of employees, up 6 points to 18.
Business activity components rising in current conditions included local business conditions, which moved back into expansionary territory by rising 12 points to 11, as well as the backlog of orders, up 11 points to 7, and equipment and software, up 7 points to 26.
All of the employment components saw some improvement in May, with wages rising 1 point to 28 and average working week rising 1 point to 9. Available skills were up 5 points but remained problematic and in contraction territory at minus 3.
Weakness was registered in capital expenditures, which fell 12 points to 19, finished goods inventories, down 7 points to 8, and services expenditures, down 5 points to 11.
Current inflation pressures rose slightly for prices paid, at 2.63 percent, as well as prices received, at 1.75 percent. Inflation expectations for prices over the next six months showed a slight decrease to 1.74 percent in the rate for prices received and to 2.18 percent for prices paid.
The strong May rebound in the Richmond Fed manufacturing Index joins manufacturing surveys from the Empire State and the Philly Fed regions reported for the month last week, all indicating robust strength in the manufacturing sector.