Nathan Redmond netted a hat-trick at Swansea's Liberty Stadium on Monday night, although his third goal appeared to go in after brushing team-mate Saldo Berahino, as England effectively sealed their place in the play-offs for the European U21 Championship.
Redmond's opener after 18 minutes was quickly cancelled out by Gwion Edwards but he restored England's lead before half-time and the scoring was completed in the 90th minute.
Southgate told Sky Sports: "I thought we were terrific with the ball. With our movement and pace, we created so many really good chances that, if I'm going to be critical, we probably should have been more ruthless.
"They are a fantastic group of players to work with and I thought there some outstanding performances, even if we didn't quite see the game out as we should have done."
Southgate was particularly impressed by the display of Redmond, who was a constant threat in attack.
"The one area of the game he is looking to add is goals, and we are able to give him the freedom to play in more advanced areas," said Southgate.
"I thought he was such a handful all night, but the service to him was good as well and we have three or four players who if we can get them in one-on-one situations are devastating in attack."
England are now nine points clear at the top of their group but Southgate is not getting carried away about their chances of playing in the tournament in Czech Republic next summer.
He added: "We want to make sure that we keep putting markers down and that we are a side that teams will fear, but the unknown is who we draw in the play-offs."
Redmond added: "We kept the ball well, and I managed to get in the right areas to score the goals.
"We've got a good young team, and the quality we show in training showed out there tonight. We kept it well, we created space and chances against a difficult Wales team that made it hard for us."
The result leaves Wales U21s with little chance of progressing into the play-offs, and manager Geraint Williams admitted his side had been outplayed.
"It was going to be a very tough game. If we were going to win, we had to be at our best defensively and with the ball," said Williams.
"Unfortunately, in the first half we didn't defend as well as we did in the first game at Derby, and we conceded two bad goals from our point of view.
"We had two great chances in the first half, and those are the ones we have got to take.
"When you play against the top international sides you have got to defend as well as you can, and when you get those chances - one versus one - you have got to put them away."