Factory Activity Pace of Growth Remained Moderate
Tenth District manufacturing activity grew moderately in July. Expectations for future activity increased after dropping in June (Chart 1, Tables 1 & 2). Monthly and annual survey price indexes fell to their lowest levels in over a year, and indexes for price expectations also moderated.
The month-over-month composite index was 13 in July, up from 12 in June, and down from 23 in May (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. In July, the slower pace in factory growth than earlier in the year was driven by decreased in activity in electrical equipment, electronic products, primary metal, chemical manufacturing, and food manufacturing. Month-over-month indexes were mostly positive in July. Indexes for production, shipments, new orders, and order backlog increased from June’s readings, while inventory and supplier delivery time indexes decreased slightly. Year-over-year factory indexes increased, to a composite index of 46. The supplier delivery time index increased slightly compared to a year ago, along with the materials inventory. However, indexes for finished goods and new orders for exports declined slightly compared to a year ago. The future composite index was 26 in July, rebounding from 10 in June. More firms expected increases in production, shipments, new orders, backlog of orders, employment, capital expenditures, supplier delivery times, and materials inventories.
|Date||Vs. a Month Ago||Vs. a Year Ago|
This month contacts were asked special questions on firms’ need and use for physical infrastructure, the change in the geographical area that firms pull workers and remote workers from over the last year, and remote workers’ wages compared to in-person wages for the same type of occupation. In July, 71% of firms reported they were using 100% of the firm’s pre-pandemic physical infrastructure (e.g., real estate, office space, etc.). Looking ahead, about 66% of firms expected no change, 27% expect an increase, and about 7% expect a decrease in the firms’ need for physical infrastructure in the next year (Chart 2). About 85% of firms reported that if they have remote workers, their wages are the same compared to in-person wages. Most firms reported that the geographical areas they pull workers (74.2%) and remote workers (86.5%) from has stayed the same over the last year (Chart 3).
Selected Manufacturing Comments
“Increased ingredient cost, freight, utilities, insurance, packaging, labor, etc. have squeezed margins to nothing is left. Been very difficult to push price increases forward. Most ingredients have been contracted forward 6-9 months just to assure availability so no near-term relief.”
“Higher interest rates seemingly have cooled off price increases for our raw materials, which is a welcome relief. Demand for our finished products is still high but might be decreasing recently.
“It appears consumers are starting to pull back spending wise. Next few months are critical. Costs still out-of-control. Need to stay aggressive on inflation.”
“Our business is seasonal, with this month being one of the lowest after a strong June. We expect things to pick up significantly by September for a strong fall season.”
“Supply chain issues persist. Costs on raw materials continue to escalate. We are unable to find reliable employees even with incentives, benefits, and substantial increases in starting pay.”
“Our new order backlog has expanded significantly during the past 18 months.”
“The availability of a consistent workforce is a huge concern. It's so everywhere, not just in Kansas. We cannot run at the levels dictated by the demand for our products. As a result, we are not building a financially sound base as we should be at this level of demand.”
“Wage inflation continues. We will be increasing all wages in the next 30 days to try to keep team members and attract more.”