Factory Activity Rose Slightly
The month-over-month composite index was 5 in February, up from 0 in January and 0 in December (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Nondurable manufacturing activity declined further, while durable manufacturing activity edged higher, driven by primary metal and electrical equipment manufacturing. The month-over-month indexes were all positive except for the employment index, which fell modestly. The production and new orders indexes grew moderately. Most year-over-year indexes were positive except for those tracking employment, backlog of orders, and finished goods inventory. Expectations for future activity ticked up with the composite index increasing from 7 to 15, as expectations for employment edged higher.
Manufacturing Composite Indexes
Skip to data visualization table| Date | Vs. a Month Ago | Vs. a Year Ago |
|---|---|---|
| 2/1/2025 | -4 | -18 |
| 3/1/2025 | -1 | -7 |
| 4/1/2025 | -2 | -8 |
| 5/1/2025 | -3 | -5 |
| 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 |
Special Questions
This month, contacts were asked special questions about their ability to pass through prices and their frequency of prices changes. Nearly one third (30%) 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%, 15% are able to pass through 40-60%, 13% can pass through 60 80%, 28% can pass through 80-100%, and 4% of firms had to decrease prices. One third of firms reported that they will be able to pass through 0-20% of higher costs in the next 12 months, 11% of firms will be able to pass through 20-40%, 9% will be able to pass through 40-60%, 14% will pass through 60-80%, 29% will pass through 80-100%, 1% will be able to pass through more than 100%, and 3% of firms had to decrease prices (Chart 2). Firms were also asked about price changes compared with last year. Almost half of firms (46%) reported no change in the frequency of price changes compared with last year, 12% reported they are changing their prices much more often than last year, 36% are changing somewhat more often, 4% are changing somewhat less often, and 2% of firms are changing prices much less often. (Chart 3).
Selected Manufacturing Comments
“Customers are becoming very price/cost sensitive.”
“Labor and supply issues (and uncertainty) are impacting us.”
“Labor retention appears to be stabilizing. We are seeing the increase in productivity.”
“There is still a good share of uncertainty in the market. Companies seem hesitant to commit to any long-term purchases.”
“Lack of skilled labor is still the top threat to be able to grow company.”
“Data center activity is high.”
“Plenty of uncertainty yet also incredible opportunities.”
“We are investing in AI technology to reduce the response time.”
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.