Lukewarm manufacturing activity reported by Kansas City Federal Reserve Bank


A survey of manufacturers in Oklahoma and other states that make up the area covered by the Federal Reserve Bank of Kansas City shows activity is “essentially unchanged in May.”

“Things are slowing down a little more than we would like,” is the response from one manager to the May Manufacturing Survey released by Chad Wilkerson, senior vice president at the Kansas City bank.

“Regional factory activity was basically flat in May,” said Wilkerson. “Employment levels increased somewhat and many firms expect to increase wages at a similar rate to the past in the year ahead.”

The district includes Colorado, Kansas, Nebraska, Oklahoma, and Wyoming; 43 counties in western Missouri; and 14 counties in northern New Mexico. The bank survey concluded there was increased price growth on a month-over-month basis but it also cooled on a year-over-year basis and raw materials prices continued to grow at a faster pace than finished product prices.

In other words, it’s costing more to manufacture the goods than their sales prices.

This month contacts were asked special questions about their ability to pass through costs to customers. 36% of District firms reported passing through 0-20% of their higher costs to their customers and another 27% report passing through 80-100%. Firms were also asked about their expectations for wage increases. 2% of firms expect wages to rise significantly faster over the next year compared to the past 12 months, 18% expect wages to rise slightly faster, 47% expect them to rise at a similar rate, 31% expect them to rise slightly slower, and 2% expect them to rise significantly slower.

Here’s what some of the managers had in response to the survey questions.

“Our business has slowed down but returns every now and then, and it’s hard to anticipate so we have increased our bar stock because we had the opportunity to buy in volume.”

“The first third of the year has been fruitful and with continued diligence, we expect it to continue. Have work in process for at least three months. On target for a record year.”

“We anticipate costs/commodities to continue to climb. It has been hard to pass through all cost increases, but we will have to be relatively aggressive in passing through cost increases due to margin compression a couple of years ago. Some of that has eased up but we can’t really go backwards.”

“While materials prices are increasing, the pressure on bid prices does not allow me to increase, so my margin is lower.”

Source: press release