Federal Reserve Bank reports more manufacturing growth

Fed report shows slight growth for Kansas City district, little change for  St. Louis – Missouri Business Alert

 

The Federal Reserve Bank of Kansas City released the October
Manufacturing Survey showing manufacturing growth in the Tenth District that includes Oklahoma. But it also revealed supply chain issues just like those around the country.

Chad Wilkerson, vice president and economist at the bank indicated expectations for future activity is at solid levels.

“Regional factory activity rose further,” said Wilkerson. “Production and employment have continued to increase. However, more firms reported additional price increases and delivery time delays. Most contacts expected supply chain issues to be resolved within the next 6 to 12 months, but 36% of firms expected these issues to persist for more than 12 months.”

Manufacturing industry growth accelerates

The survey also found that the monthly index of prices paid for raw materials posted a new survey record high in October. At least 99% of firms continued to report higher input prices compared to a year ago.

“There is no way to increase prices enough to off-set higher costs from transportation and labor shortages and material cost increases. We expect smaller [profit] margins, with perhaps lower sales volumes, to continue to hamper our long-term sustainability as a small family company,” responded one participant in the survey.

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But the supply chain issues reported nationally were also observed by those in the region.

“We currently see both increasing demand and supply chain bottlenecks occurring. Meeting increased demand will make it exceedingly hard to clear the bottlenecks,” said one.

“Lack of transportation resources is a serious issue that we do not see being resolved in the short run,” added another.

Finished goods price indexes also increased from a month ago and a year ago. Moving forward, more district manufacturing firms expected additional materials and finished goods price increases over the next six months.

Factory growth in October was driven by increased activity at nondurable goods plants, in particular paper and printing production, chemical manufacturing, and plastics products, while durable goods manufacturing grew more moderately.

Firms continued to report higher supplier delivery times, setting another survey record high. Even so, production, shipments, new orders, and employment expanded more in October compared to the previous month. Order backlog declined slightly. The pace of growth for month-over-month materials inventories eased in October, while finished goods materials inventories inched up.

Compared to a year ago, production, new orders, and supplier delivery time increased.