Manufacturing activity in a multi-state region including Kansas remained steady in May, while expectations for future activity grew modestly, according to the latest survey from the Kansas City Federal Reserve.
Price growth increased on a month-over-month basis but cooled on a year-over-year basis, and raw materials prices continue to grow at a faster pace than finished product prices.
“We anticipate costs/commodities to continue to climb. It has been hard to pass through all cost increases, but we will have to be relatively aggressive in passing through cost increases due to margin compression a couple of years ago. Some of that has eased up but we can’t really go backwards,” said one manufacturing leader who responded to the survey.
The month-over-month composite index was -2 in May, up from -8 in April and -7 in March. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.
The pace of decline slowed in paper, chemical, and fabricated metal manufacturing while activity expanded in printing, nonmetallic mineral, and furniture manufacturing. The month-over-month indexes were mixed, but most improved from last month.
Production was flat and employment grew, while employee workweek, materials inventories, and supplier delivery time declined slightly. The volume of new orders fell at a moderate pace, with a reading of -13.
The year-over-year composite index for factory activity picked up to -6 from -12, driven mostly by rebounds in inventories and employment. Capital expenditures stayed steady after declining for three consecutive months.
The future composite index increased from 2 to 6 in May, as firms anticipate significant increases in production and employment in future months.
The manufacturing survey conducted by the Kansas City Federal Reserve Bank includes responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.
