Factory Activity Rose Moderately
The month-over-month composite index was 11 in June, up from 8 in May and 10 in April (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Growth in the durable manufacturing sector was driven primarily by transportation equipment manufacturing, while growth in the nondurable manufacturing sector was driven by food manufacturing. All month over-month indexes were positive except for the inventory indexes. Production, new orders, and employment all saw higher readings than last month. The year-over-year composite index fell from 17 to 15, but all indexes were positive. Growth in new orders and production cooled to 19 and 20, respectively, while capital expenditures remained most steady at a reading of 2. Expectations for future activity remained expansionary with the composite index staying at 19.
Manufacturing Composite Indexes
Skip to data visualization table| Date | Vs. a Month Ago | Vs. a Year Ago |
|---|---|---|
| 6/1/2025 | -1 | -14 |
| 7/1/2025 | 1 | -5 |
| 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 |
Special Questions
This month, contacts were asked special questions about their ability to pass through prices and supply chain change expectations. Almost two-fifths (38%) of firms reported that they are currently able to pass through 0-20% of the higher costs from inputs and labor, 10% of firms are able to pass through 20-40%, 10% are able to pass through 40-60%, 11% can pass through 60- 80%, 19% can pass through 80-100%, 4% can pass through more than 100%, and 8% of firms had to decrease prices. Over a third (37%) of firms reported that they will be able to pass through 0-20% of higher costs in the next 12 months, 9% of firms will be able to pass through 20-40%, 13% will be able to pass through 40-60%, 12% will pass through 60-80%, 16% will pass through 80-100%, 7% will be able to pass through more than 100%, and 6% of firms had to decrease prices (Chart 2). Firms were also asked about any expectations for supply chain disruptions and shortages to change in the next 6 months. Almost half (46%) of firms expect no change, 3% expect them to significantly decrease, 21% expect them to slightly decrease, 27% expect them to slightly increase, and 3% expect them to significantly increase. (Chart 3).
Selected Manufacturing Comments
“Cost increases are coming in across all supply categories. We are passing these along to our clients.”
“We are seeing slow growth with expectations for that growth to increase into early 2027. As such, we are not cutting staff/capacity as we believe we'll need it soon.”
“Demand for our products has slowed down significantly due to gas prices.”
“Geopolitical instability continues to impact our business.”
“From a sales and potential sales perspective business is quite good. Much better than expected and much better than Q1. Cost input is the problem. Mostly driven by freight/energy costs.”
“Our business levels are strong, and we are investing in new equipment and automation in order to increase production despite worker shortages.”
“In business, predictability and stability are very important, we have none of that.”
“Still concerns with high costs.”
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
