The latest survey from the Kansas City Federal Reserve indicates that manufacturing activity in the Tenth District continued to expand in May, though the rate of growth showed signs of slowing. The composite index, which measures production, new orders, employment, supplier delivery times, and raw materials inventory, registered a score of 8 for May. While this is a slight decline from April’s reading of 10, it still signals steady growth within the regional manufacturing sector.
Durable goods manufacturing saw a notable deceleration, largely due to a drop in transportation equipment output. In contrast, nondurable goods production maintained positive momentum, driven primarily by gains in the paper and printing industries. Despite most monthly indicators remaining in positive territory, some areas experienced declines; new export orders, employment levels, and raw material inventories all fell during the month.
Examining year-over-year figures reveals a stronger picture: the composite index climbed from 6 to 17, reflecting broad improvements across nearly all categories except export orders. Expectations for future activity also edged higher, with the forward-looking composite index rising from 18 to 19. This modest increase was fueled by growing optimism about employment prospects within the manufacturing sector.
Survey participants reported more frequent changes in input prices compared to last year, with approximately 65% of firms experiencing this volatility. About one-third also noted more frequent fluctuations in output prices. Hiring intentions have remained relatively stable since early this year for over half of the companies surveyed; however, 22% plan to expand their workforce while 20% expect reductions. Capital investment plans appear more cautious: nearly a quarter anticipate cutting back on investments, while only 15% foresee increases.
Manufacturers continue to grapple with rising costs and labor shortages. Several firms pointed to higher fuel prices as a key driver behind increased raw material and delivery expenses. Others highlighted ongoing challenges in recruiting skilled workers and concerns over shrinking profit margins amid climbing input costs and wage pressures. Despite these obstacles, demand was described as gradually improving, with expectations for slow acceleration throughout the remainder of the year.
The Kansas City Fed Manufacturing Survey gathers monthly data from roughly 300 manufacturing plants across Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri. This survey provides vital insights into regional economic conditions and serves as an important indicator of inflationary pressures and growth trends within the manufacturing industry. Although growth appears to be moderating slightly this month, the sector remains on an upward path with cautious optimism about what lies ahead.
