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Factory Activity Declined at a Slightly Faster Pace

Tenth District manufacturing activity declined at a slightly faster pace than last month, while expectations for future activity were mostly flat or slightly positive (Chart 1, Tables 1 & 2). The monthly index of raw materials prices continued to slow in December, but materials prices were still higher than a year ago at most firms and expected to rise moderately in the months ahead. Finished goods price increases were also smaller than last month and more firms than in previous surveys anticipated further easing.

The month-over-month composite index was -9 in December, down from -6 in November and -7 in October (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The slower pace in factory growth in December was driven by decreased activity in printing, wood products, machinery manufacturing, and food manufacturing. Month-over-month indexes were mostly negative in December. The monthly employment index fell from 3 to 0, its lowest level since 2020 but still indicative of flat employment for the month. Indexes for year-over-year factory activity slowed slightly in December, including the composite index, which decreased from 19 to 15. The future composite index increased from 0 to 2 in December, with the expected volume of new orders index also moving into positive territory for the first time in two months.

Manufacturing Composite Indexes

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The month-over-month composite index was -9 in December, down from -6 in November and -7 in October. Year-over-year factory activity slowed slightly in December, and the composite index decreased from 19 to 15.
Date Vs. a Month Ago Vs. a Year Ago
Dec-21 22 50
Jan-22 24 50
Feb-22 29 50
Mar-22 37 57
Apr-22 25 54
May-22 23 54
Jun-22 12 35
Jul-22 13 46
Aug-22 3 36
Sep-22 1 30
Oct-22 -7 24
Nov-22 -6 19
Dec-22 -9 15

Special Questions

This month contacts were asked special questions about price pass through and expectations for wages and prices. In December, 43% of firms expected wages to rise faster compared to the past 12 months, while 23% of firms expected wages to rise at a similar rate and 35% of firms expected wages to rise more slowly (Chart 2). About 27% of all firms facing higher costs (inputs and labor) were able to pass through 80 to 100% of increased costs, while a quarter of firms could only pass through 0 to 20% (Chart 3).

Selected Manufacturing Comments

“All we have done over the last two years is increase costs. Pass through percentages averaged only 55% and we absorbed the remaining.”

“Costs of raw materials have risen at a rapid rate, but the possibility exists we have weathered the storm and these prices will begin to level out.”

“We are definitely seeing a decrease in customer demand for almost all our items. December has been extremely slow, and we fear a recession is under way.”

“Sales remain strong although softening a little. Workforce shortages continue with no end in sight. Parts shortages continue to limit production but slowly improving.”

“Everything in our world is still very aggressive – both cost wise and volume of business wise. We have seen some stabilizing on some commodities and freight – but other items are still climbing aggressively. Hard situation with how much we can really pass through to customers. Our profitability is not where it needs to be despite record sales and manufacturing volumes.”

Survey Data

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About Manufacturing Survey


Chad Wilkerson

Senior Vice President and Oklahoma City Branch Executive

Chad Wilkerson serves as Oklahoma City Branch Executive and Senior Vice President for the Federal Reserve Bank of Kansas City. Wilkerson began his career with Federal Reserve in …