Mid-Atlantic Manufacturing Sees Unprecedented Price Inflation, Record-Breaking Labor Shortage

US President Joe Biden arrives to participate in the US Coast Guard Academys 140th commencement exercises on May 19, 2021 in New London, Connecticut. (Photo by Nicholas Kamm / AFP) (Photo by NICHOLAS KAMM/AFP via Getty Images)
NICHOLAS KAMM/AFP via Getty Images

Manufacturing businesses across the central Atlantic region in the U.S. are experiencing a severe labor shortage and record-shattering inflation, data from a survey from the Federal Reserve Bank of Richmond showed Tuesday.

The Fifth District Survey of Manufacturing Activity’s gauge of the ability of employers to find workers with the necessary skills dropped to the lowest level recorded in data stretching back to 2010. Despite this, the employment index rose to 25 from 19, signaling manufacturers increased hiring in May. The wage metric also indicated rising wages, although at a slightly lower level than April.

Manufacturers reported a 9.82 annualized rate increase for prices paid for materials used in their businesses, a record high. They also reported a 5.41 percent rise in prices received for finished goods, also a record increase.

Expected price gains for both prices paid and received also rose to record highs.

The Richmond Fed produces its indexes by surveying manufacturing firms across the District of Columbia, Maryland, North Carolina, South Carolina, Virginia, and most of West Virginia.

Manufacturing activity in the Fifth District expanded for the tenth straight month in May, although the pace of the expansion has slowed from the record high in October. The survey’s composite index rose to 18 from 17 last month, roughly in line with expectations.

All three of the component indexes–shipments, new orders and employment–remained positive. New orders and employment improved slightly.

Shipments declined and order backlogs rose, which may indicate shortages of materials for completing orders. Meanwhile, the index for raw materials inventories reached a record low and finished good inventories contracted.

The gasoline shortages in the region may have contributed to the shipment decline.

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