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Factory Activity Declined Moderately

Tenth District manufacturing activity declined moderately, and expectations for future activity expanded further (Chart 1, Tables 1 & 2). Prices paid for raw materials in January increased sharply relative to last month and this time last year. Heading forward, raw materials prices are expected to continue increasing at a faster pace than finished product prices.

The month-over-month composite index was -9 in January, down from -1 in December and -2 in November (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The contraction was driven more by durable goods manufacturing, particularly nonmetallic mineral and primary metal manufacturers. All month-over-month indexes were negative and decreased from previous readings, except the price indexes. Production and new orders fell to -17 and -19, respectively, but employment stayed mostly flat with a reading of -2. Year-over-year factory indexes decreased further in January, with the composite index decreasing from -8 to -12. Other than the prices indexes, the capital expenditures is the only index with a positive reading, but it cooled from 13 to 1. Meanwhile, the future composite index grew from 5 to 11 in January with heightened expectations for production and shipments in the next six months.

Manufacturing Composite Indexes

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A time series chart from January 2019 to January 2024 showing the manufacturing composite diffusion index of activity versus a month ago and versus a year ago. The month-over-month composite index was -9 in January, down from -1 in December and from -2 in November. The year-over-year composite index declined from -8 to -12 in January.
Date Vs. a Month Ago Vs. a Year Ago
Jan-23 -2 4
Feb-23 -2 5
Mar-23 -1 6
Apr-23 -9 -2
May-23 -2 6
Jun-23 -11 -12
Jul-23 -9 -4
Aug-23 0 -9
Sep-23 -7 -12
Oct-23 -6 -11
Nov-23 -2 -9
Dec-23 -1 -8
Jan-24 -9 -12

Special Questions

This month contacts were asked special questions about expectations for wages, input prices, and capital expenditures in 2024. A majority of firms (57%) expect to increase wages by 2-4% in 2024, while another 4% expect no change, 15% expect a 0-2% increase, 22% expect 4-6%, and 2% expect 6-8% growth. Expectations for input prices were more mixed. 41% of firms expect input prices to increase 2-4%, while 21% each expect a 0-2% or 4-6% increase, 1% expect a decrease, 8% expect no change, 6% expect a 6-8% increase, and 2% expect an increase of over 8% (Chart 2). Firms cited the need to preserve cash (45%) and uncertainty (42%) in the coming year as the top factors impacting capital expenditures plans in 2024. Additionally, 27% of firms selected unfavorable financing as having an impact and 12% of firms said they have no need to expand current levels of capital expenditures (Chart 3).

Selected Manufacturing Comments

“The labor market is getting better from both a quantity and quality perspective. Cost inputs are semi-stable. Some things down, some things still up."

“Very cold temperatures are negatively affecting our business right now.”

“Supply chain has improved, prices for materials are falling fast and delivery times are much better.”

“There is a lot of uncertainty with inflation and demand. We are being optimistic and planning on growth, but we don't have the visible indicators to support that plan in the market today.”

“We have a healthy backlog of orders and expect to continue for the near future.”

“Demand for our product remains high. Perhaps not increasing like it has been the last couple of years, but it's leveling off, certainly not decreasing overall.”

“Freight due to issues in Suez and Panama canals are already affecting inbound prices. We expect that to increase in coming months. We are currently projecting a minimum cost increase to raw materials of between 5-10% depending on the item.”

“Demand is still weak. More companies are asking for longer payment terms.”

“The month of January has started off strong. How we perform through the first quarter of 2024 is going to determine how aggressive we get in capital expenditures and hiring.”

“So far materials are easily found. We have not experienced many shortages. Prices seem somewhat stable.”

Survey Data

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About Manufacturing Survey


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…