Tuesday’s economic readings may be overshadowed by news of terrorist attacks in Brussels. Still, the Federal Reserve Bank of Richmond issued its Fifth District Survey of Manufacturing Activity report, showing a stellar gain for March. This report showed broader activity gains, as well as higher rates in new orders and in shipments.

March’s headline index reading surged to a gain of 22, up from −4 in February. Bloomberg’s consensus estimate was a mere flat line of 0. What stands out here is that this was the strongest reading since April of 2010, and it was the largest monthly change in the 23 years history of this report.

Employment also was shown to have advanced at a slightly faster pace in March. Average wages grew moderately, and the average workweek lengthened.

The Richmond Fed also showed that prices of raw materials and finished goods rose at a faster pace, compared to the prior month.

One issue that always can come to mind here is that the sampling pool of business is very small. Still, a move up of this magnitude should show further recovery underway in the Eastern half of America after gains have been seen in manufacturing reports from the Federal Reserve branches of Philadelphia and New York City.

The Richmond Fed further said:

Manufacturers anticipated robust business conditions during the next six months. Firms expected faster growth in shipments and in new orders in the six months ahead. Additionally, survey participants looked for increased capacity utilization and expected order backlogs to grow. Producers looked for vendor lead times to lengthen modestly.

Survey participants’ outlook for the months ahead also included faster growth in average wages and the average workweek, with a pickup in hiring during the next six months. Over the next six months, manufacturers expected faster growth in prices paid and received.

Individual components were seen as follows:

• New orders rose 30 points to 24.
• Backlog orders rose by 15 points to a slightly positive reading of 1.
• Shipments rose a sharp 38 points to 27.
• Capacity utilization rose 22 points to 17.
• Workweek (average) rose by 11 points to 16.
• Wages were up 10 points to 20.
• Hiring was flat at 11.

With the Federal Reserve looking for continued evidence of a 2.0% inflation reading, the Richmond Fed showed the following data on prices:

Prices of raw materials rose more quickly this month, advancing at an at an annualized 0.60 percent rate, compared to a rate of 0.16 percent previously. Prices of finished goods also rose at a faster pace this month, growing at a 0.40 annualized rate, compared to February’s 0.29 percent pace.

For the six months ahead, survey respondents expected input prices would rise more quickly, at an annualized 0.95 percent pace. However, expectations were slightly below February’s expectation for 1.18 percent growth. Finished goods prices were expected to rise at an annualized 0.77 percent rate, compared to the previous expectation for 0.69 percent growth.

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