Factory activity in Oklahoma and other Midwestern states increased at a record pace this month according to the March Manufacturing Survey released by the Federal Reserve Bank of Kansas City.
But Chad Wilkerson, vice president and economist at the Federal Reserve Bank said there was also a catch to that record pace.
““However, due to increasing input costs and supply chain disruptions, nearly a quarter of firms noted a significant decrease in profit margins since the beginning of the year, and another 44% reported a slight decrease in profit margins.”
The month-over-month composite index was 37 in March, the highest on record in the Tenth District survey. It is up from 29 in February and 24 in January. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.
Increased activity was driven by growth in printing and paper, plastics, electrical equipment, furniture and related product manufacturing, and especially transportation equipment. On the other hand, the pace of growth for food and machinery manufacturing declined.
In March, 47% of firms reported increasing prices much more often compared to last year, and 32% raised prices somewhat more often. However, 44% of firms reported a slight decrease and 23% reported a significant decrease in profit margins since the beginning of the year. Firms reported that the majority of impacts from the Russia/Ukraine conflict centered around supply chain disruptions and higher input costs.
“The employee problems everyone is facing have only gotten worse, this has and will continue to be our biggest hurdle for our company and so many others.
What did some of the survey respondents have to say?
“Overall, it feels like demand for our products is plateauing. After months of almost unprecedented demand increases, orders seem to be leveling off – not decreasing, just leveling off. Hopefully we can have a “soft-landing” from these crazy times and not a sharp drop off a cliff…”
“Effect on us [from the Russia/Ukraine conflict] is energy and freight price increases, freight delays. We have to pass on longer lead times and price increases.”
