Research >> Economics
Kansas City Fed Manufacturing Activity edged higher in December 2021
|
Tenth District manufacturing activity growth edged higher, but expectations for future activity moderated slightly. The monthly index of raw materials prices continued to ease slightly from a month ago, although most firms continued to report higher input prices compared to a year ago. Finished goods price indexes declined from a month ago but were also above year ago levels for most firms. Expectations for future raw materials prices rose, and a significant share of district manufacturing firms still expected finished goods prices to increase over the next six months.
The month-over-month composite index was 24 in December, the same as 24 in November, but down slightly from 31 in October. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Factory growth was driven by increased activity at nondurable goods plants, especially for paper, chemicals, plastics, and transportation equipment manufacturing. Month-over-month indexes were positive in December, indicating expansion. The pace of growth increased for shipments, new orders, and inventories. On the other hand, supplier delivery time eased slightly. Year-over-year factory indexes continued to expand at a steady rate, and the year-over-year composite index was 50 for the third month in a row. Inventories rose compared to a year ago, along with production, and capital expenditures. The future composite index was 25 in December, down from 35 in November. Expectations remained positive across a number of indicators, but the pace of expected growth eased slightly from November to December.
Special Questions
This month contacts were asked special questions about risks for 2022 along with wage expectations and other labor costs. A significant share of firms reported lack of available labor, ongoing supply chain disruptions or shortages, and rising materials costs as key risks facing their business in 2022 (Chart 2). Additionally, a number of firms indicated that a resurgence of the virus would either slightly or significantly negatively impact their business. For 2022, nearly 70% of firms are planning to increase wages between 2% to 6%, and no firms expected wages to decrease (Chart 3). Additionally, over 85% of firms expected a more than 2% increase in other labor costs such as benefits, training, and time off.
Posted: December 16, 2021 Thursday 11:00 AM