Research >> Economics
Kansas City Fed Manufacturing Activity moderated slightly but remained solid in September 2021
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Tenth District manufacturing activity growth moderated slightly but remained solid, and expectations for future production increased further. The index of prices paid for raw materials continued to increase at record levels in September compared to a month ago and a year ago. Price indexes for finished goods also remained very high. Additionally, district manufacturing firms expected materials prices and finished goods prices to rise more over the next six months.
The month-over-month composite index was 22 in September, moderately lower than 29 in August and 30 in July. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Factory growth continued to be driven by a faster increase in durable goods, in particular primary metals, computer and electronic products, and transportation equipment, while nondurable goods manufacturing grew more modestly. Month-over-month indexes remained positive in September, indicating expansion, but the pace of growth moderated slightly. The month-over-month index for materials inventories reached the highest level since late 2017, rebounding after pandemic lows last year, while finished goods materials inventories were marginally positive. Firms reported another increase in supplier delivery time, setting a survey record high. Year-over-year factory indexes expanded steadily as the year-over-year composite index changed from 50 to 48, and production and supplier delivery time increased. The future composite index was 35 in September, and expectations for future production matched the survey record last seen in 2003.
Special Questions
This month contacts were asked special questions about hiring plans and price increases. Since earlier this summer, 56% of firms reported no change in hiring plans (Chart 2). However, 38% of firms reported they expect to hire more workers in the remainder of 2021 than initially planned earlier this summer, and 6% of firms expect to hire fewer workers. All survey respondents reported facing higher input costs due to elevated material or labor expenses compared to last year. 41% of firms indicated the ability to pass through 0-20% of those cost increases to their customers in the form of higher prices, over a third of firms reported passing through 21-80% of price increases, and nearly a quarter of firms indicated passing through 81-100% of price increases.
Posted: September 23, 2021 Thursday 11:00 AM