Research >> Economics
Kansas City Fed Manufacturing Activity Increased at a Slower Pace in September
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Tenth District manufacturing activity increased at a slower pace in September and remained lower than a year ago, while expectations for future activity were positive. Prices paid for raw materials and finished goods rose further. District firms expected prices for both raw materials and finished goods to grow in the next six months.
Factory Activity Increased at a Slower Pace
The month-over-month composite index was 11 in September, slightly lower than 14 in August but higher than 3 in July. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Activity at non-durable and durable goods factories expanded at a similar pace. The increase in activity at food and beverage manufacturers was slower in September than in previous months, when activity bounced back more sharply. Most month-over-month indexes remained positive, indicating continued expansion. Production, shipments, new orders, and employment rose at a slower pace, while order backlog and supplier delivery time increased. The indexes for employee workweek and new orders for exports dipped slightly, and inventory indexes for materials and finished goods were negative. Most year-over-year factory indexes remained negative in September, and the composite index declined from -19 to -21. The future composite index was still positive in September at 18, similar to expectations in August.
Special Questions
This month contacts were asked special questions about wages for workers that were furloughed and then rehired, in addition to questions about expected wage growth and business plans. For factories that furloughed workers, most contacts indicated that wages for rehired/returned employees were the same as before workers were furloughed. However, 71% of contacts reported they did not furlough workers. Overall, firms anticipated slightly lower wage and salary growth in the year ahead. Specifically, 36% of firms thought wage and salary growth would be lower than in the previous year, while 28% said it would be higher. In the next six months, more than 60% of firms expected to identify and hire new employees and/or increase marketing or sales. Around one-third of contacts also expected to identify new supply chain options and/or develop online sales or websites. More than 20% of firms noted they would need to obtain financial assistance or additional capital.
Posted: September 24, 2020 Thursday 11:00 AM