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Tenth District Manufacturing summary

Tenth District manufacturing activity was flat in December, and expectations for future activity picked up. Price increases for both raw materials and finished products picked up slightly this month with further increases expected. However, price growth eased year-over-year. Increases in raw materials prices continue to outpace finished product prices increases. (Chart 1, Tables 1 & 2)

Factory Activity Was Flat

The month-over-month composite index was -1 in December, up slightly from -2 in November and -8 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. Activity for nondurable goods rose—particularly for food & beverage and plastics manufacturing—while activity declined slightly for durable goods, driven by primary metal and furniture manufacturing. The production, shipments, and new orders indexes were all slightly negative, while employment activity rebounded. Additionally, inventories for raw materials and finished goods rose slightly after a stagnant few months. The year-over-year index for factory activity ticked up to -8 from -9. Production, new orders, backlogs, supplier delivery time, and the average employee workweek remained negative but rose slightly from last month’s readings. Capital expenditures continued to expand moderately. The future composite index increased to 6 from -1 in December, as sentiment for production and new orders is higher than earlier this year and employment is anticipated to rise.

Manufacturing Composite Indexes

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A time series chart from December 2018 to December 2023 showing the manufacturing composite diffusion index of activity versus a month ago and versus a year ago. The month-over-month composite index was -1 in December, up slightly from -2 in November and -8 in October. The year-over-year composite index ticked up to -8 in December from -9 in November.
Date Vs. a Month Ago Vs. a Year Ago
Nov-22 -2 19
Dec-22 -4 15
Jan-23 -1 4
Feb-23 0 5
Mar-23 0 6
Apr-23 -10 -2
May-23 -1 6
Jun-23 -12 -12
Jul-23 -11 -4
Aug-23 0 -9
Sep-23 -8 -12
Oct-23 -8 -11
Nov-23 -2 -9
Dec-23 -1 -8

Special Questions

This month contacts were asked special questions about expectations for demand and capital expenditures in 2024. 42% of firms expect demand for their products to be slightly higher in 2024 and 6% expect it to be significantly higher, while 22% of firms expect no change, 23% expect slightly lower demand, and 7% expect significantly lower demand (Chart 2). 32% of firms expect capital expenditures to be unchanged in 2024, while 28% expect them to be slightly higher and 10% significantly higher. Only 18% of firms expect to capital expenditures to be slightly lower and another 12% expect significantly lower expenditures (Chart 3).

Selected Manufacturing Comments

“We are hoping supply chain issues improve and upward pressure on raw material prices eases. Our margins have taken some hits in order to maintain business.”

“2023 revenue is up by the amount of price increases taken in May. Volume in pounds shipped is down indicating customers are buying less. Price increase fatigue has hit our customers, and we are receiving significant resistance. This has squeezed gross margins. Restaurant traffic is down, grocery traffic is down. Difficult time to operate a food manufacturing business.”

“Backlogs for 2024 are good. The fourth quarter of 2023 will be impacted by a reduction in discretionary spending for interiors and avionics. Part of this could be caused by high demand of travel and reluctance of companies to put their aircraft down during this timeframe.”

“Fortunately, business is good and based on contractual agreements and customer sentiment business will remain strong in 2024. Still very concerned about inflation. Raw ingredients have basically leveled, but we are not bullish on where they move medium to long-term. Labor is much better, but still relatively expensive. Access to capital is not a huge issue. Cost of capital is a significant challenge.”

“Labor is more consistent and stable for skilled workers, but still a challenge for entry level. Overtime is up for year-end production demand. Health costs are up around 5% year over year. Supply chain for electronic parts is better, but seeing longer lead times for outdated electronic parts and some parts out of China.”

Survey Data

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Historical Monthly Data

External LinkAbout Manufacturing Survey

Authors

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 …

Chase Farha

Research Associate

Chase Farha is a Research Associate in the Regional Affairs department at the Oklahoma City branch of the Federal Reserve Bank of Kansas City. In this role, his responsibilities …

Jannety Mosley

Senior Survey Analyst

Jannety Mosley is a Senior Survey Analyst in the Regional Affairs Department at the Oklahoma City Branch of the Federal Reserve Bank of Kansas City. In this role, she primarily s…