The Kansas City Federal Reserve Bank reports its latest survey of firms in Oklahoma and other states that make up the Tenth District found manufacturing activity did not decline as much in August as it did in July. Furthermore, of those surveyed, many have positive expectations for future activity.
Chad Wilkerson, senior vice president at the Federal Reserve Bank explained that nondurable manufacturing was essentially flat, while durable goods manufacturing fell somewhat, driven by transportation equipment, fabricated metal, and machinery.
“Regional factory activity did not decline as much in August following a sharper decline last month,” said Wilkerson. “Production rebounded somewhat while the volume of new orders and employment decreased further but are expected to grow in the next six months.”
Finished product prices made gains in August compared to July when they stayed flat. The raw materials prices continue to grow at a faster pace, according to the survey. Compared to a year ago, the survey found factory activity ticked down as production, shipments and new orders “all continue to fall considerably.”
There was also a moderate decline in employment levels while capital expenditures remained steady. But the survey discovered that manufacturers anticipate production and employment will increase substantially.
This month contacts were asked special questions about plans for hiring and capital expenditures as well as transportation costs. 19% of firms report they expect to hire more workers by the end of 2024 than they had originally planned at the beginning of the year, while 32% expect to hire less workers and 49% of firms’ plans are unchanged. Additionally, 11% of firms expect more capital expenditures by the end of the year than originally planned, 29% expect less, and 60% have unchanged plans.
Contacts were also asked about transportation costs. In the last 6 months, transportation costs have increased significantly for 20% of firms, increased slightly for 50%, remained unchanged for 17%, and decreased slightly for 13%. Similarly in the next 6 months, 3% of firms expect transportation costs to increase significantly, 61% expect a slight increase, 28% expect no change, and 8% expect a slight decrease.
Selected Manufacturing Comments
“Orders for the first half of 2024 were down substantially. We suspect that customers have been holding off, expecting interest rates to drop. We are seeing some recovery, but mostly with international customers.”
“Everything flipped in July. We got caught up and orders were pushed out at the same time. We laid off 30% of our hourly work force last week.”
“We continue to experience lower business levels than we have in the past several years. New business opportunities have come from failures of competitors, including facility closures, cyber-attack and ERP issues. There is continuing wage pressure at the shop-floor level. Election uncertainty, foreign dumping and the erosion of the spending power of consumers (higher debt/lower savings) make future business levels concerning.”
“We’re starting to see some sales softening – especially with long-term/legacy customers. Really only has become noticeable over the last month or so. Customers telling us their transactions are down to a significant level. We remain concerned about cost increases on product inputs, particularly select commodities. Labor market continues to become more attractive with lots of incoming applicants.”
“Our industry is down by 20-35% which is a challenge to our sales department and maintaining work for our employees.”
The survey was of manufacturing firms in the bank’s district. The western portion of the district lies along the Rocky Mountains and consists of Colorado, Wyoming, and the northern half of New Mexico. The Tenth Federal Reserve District covers the states of Colorado, Kansas, Nebraska, Oklahoma, and Wyoming; 43 counties inwestern Missouri; and 14 counties in northern New Mexico