Factory Activity Remained Steady
The month-over-month composite index was 10 in August, up from 9 in July and down 11 in June (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Durable manufacturing growth slowed, but nondurable manufacturing activity increased, driven primarily by paper and printing manufacturing. All month-over-month indexes were positive except for new orders for exports at -2. Both employment indexes fell somewhat from last month. The year over-year composite index ticked up from 14 to 16, and all other indexes were positive except for new orders for exports. Growth in capital expenditures accelerated from 6 to 16. Expectations for future activity remained expansionary with the composite index at 20, as expectations for new orders increased.
Manufacturing Composite Indexes
Skip to data visualization table| Date | Vs. a Month Ago | Vs. a Year Ago |
|---|---|---|
| 8/1/2025 | 1 | -2 |
| 9/1/2025 | 3 | -7 |
| 10/1/2025 | 4 | -6 |
| 11/1/2025 | 7 | -1 |
| 12/1/2025 | 0 | -4 |
| 1/1/2026 | 0 | -4 |
| 2/1/2026 | 5 | 2 |
| 3/1/2026 | 11 | 8 |
| 4/1/2026 | 10 | 6 |
| 5/1/2026 | 8 | 17 |
| 6/1/2026 | 11 | 15 |
| 7/1/2026 | 9 | 14 |
| 8/1/2026 | 10 | 16 |
Special Questions
This month, contacts were asked special questions about factors for increases in production and turnover. Almost two-fifths (39%) of firms reported their primary factor allowing them to increase production without adding workers was technology improvements, 22% of firms reported their primary factor was reduced turnover, 18% reported they have not been able to increase production without adding workers, 13% reported their primary factor was not listed, and 8% reported their primary factor was outsourcing, (Chart 2). Firms were also asked about their employee turnover this year compared to their typical turnover level. Nearly half of firms (44%) reported unchanged turnover, 31% reported it to be slightly lower, 17% reported it to be slightly higher, 4% reported turnover this year to be significantly lower than their typical level, and 4% reported this year’s turnover is significantly higher than their typical turnover level. (Chart 3).
Selected Manufacturing Comments
“Our costs have escalated so high, other products are becoming more competitive with us, causing us to lose that competitive advantage.”
“Our growth dictated that we must invest in capital equipment. The cost of financing was painful, but we really had no choice but to absorb the higher cost of capital.”
“New orders have been soft so far this quarter.” “It's difficult for our customers to plan and that hurts us.”
“High costs, along with uncertainty and volatility, continue to create challenges for us and many other small businesses.”
“Manufacturers are starting to lower inventories. Numerous price increases have been coming from input suppliers but are difficult to pass on.”
“Our goal this year was to preserve capital and work to build up reserves and pay down current debt. We can increase efficiency through other methods rather than large capital outlays in the short term. Let's build the work load up, then come back and make the capital investments in efficiency.”
“Increased costs and unpredictability continue to be a concern.”
Survey Data
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.
Authors
Cortney Cowley
Assistant Vice President and Oklahoma City Branch Executive
