Manufacturing shows signs of improvements but concerns linger


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 December
Manufacturing Survey Thursday showing manufacturing activity in the Tenth District that included Oklahoma had edged higher.

However, Chad Wilkerson, vice president and economist at the bank said expectations for future activity moderated slightly.

“Regional factory activity continued to grow modestly in December,” said Wilkerson. “Materials price increases slowed slightly from a month ago, and most firms expected to raise wages in 2022.”

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.

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.

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. 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. Additionally, over 85% of firms expected a more than 2% increase in other labor costs such as benefits, training, and time off.

Manufacturing Month showcases standout companies, leaders in sector |  Business News |

The following are comments from some of the supply side managers.

“Have seen a recent resurgence of COVID in our operation. It really hurts our productivity.”

“301 tariffs remain a risk in 2022… adding cost to the consumer with each purchase made.”

“We draw employees from 60 miles or more. When fuel prices go up, we start losing employees due to the fuel cost on the family budget. We were able to keep our health insurance premium increases to a minimum this year. However, we believe we will see a spike in medical costs coming up.”

“We do not expect business to get significantly better in 2022. There are too many issues that cannot be solved in the immediate future.”

“We have some great opportunities in 2022 but we just need to make it to 2022. We have lost so much capital over the past 18-24 months that we just don’t have the bandwidth for much more negative to happen.”

“Our supply chain is having major issues – steel and component prices are up significantly and shortages and delays are causing unpredictability in our production. It is difficult to get ahead of these issues from a pricing and delivery standpoint.”

Source: Bank press release