Tenth District Manufacturing Activity Rose Further in October
The Federal Reserve Bank of Kansas City released the October Manufacturing Survey showing a surprising increase in manufacturing and a boost in expectations for future activity.
“Regional factory activity continued to increase modestly in October, and firms expect additional growth in the next six months,” said Cortney Cowley, assistant vice president and Oklahoma City Branch executive. “Two-thirds of firms surveyed reported that AI has not affected their business strategy or plans, while another third have used AI or plan to in the future.”
The month-over-month composite index was up not only from September to October, but also up from August. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Both durable and nondurable manufacturing activity grew slightly.
Growth in the nondurable manufacturing sector was driven primarily by printing and paper manufacturing, while growth in the durable manufacturing sector was driven primarily by metal manufacturing. Most month-over-month indexes were positive except for new orders for exports and average work week.
Production and shipments increased moderately. Most year-over-year indexes were negative except for the supplier delivery time and capital expenditures indexes. Production and employment indexes remained in negative territory. Expectations for future activity accelerated, with the composite index increasing from 7 to 14. However, expectations for new orders and employment in the next six months remained unchanged from last month’s expectations.
Special Questions
This month, contacts were asked special questions about changes in profit margins and AI usage. Over a third of firms (37%) reported their profit margins slightly decreased this year, 18% reported a significant decrease, 17% reported no change, 25% reported a slight increase, and 3% reported their profit margins this year significantly increased. In 2026, 31% of firms expect their profit margins will slightly decrease, 7% anticipate a significant decrease, 22% anticipate no change, and 40% anticipate a slight increase (Chart 2). Additionally, two-thirds of firms (67%) reported that AI has not affected their business strategy or plans, while 12% of firms expanded their existing use of AI since the beginning of 2025, 13% started using AI, and 8% have not incorporated AI but plan to in the future (Chart 3).
Selected Manufacturing Comments
“So much uncertainty with prices. We hope to hold or slightly increase prices, but we are getting pressure to lower some prices.”
“Construction activity continues to slow; backlog of work decreasing. A lot of uncertainty in the market.”
“We have increased prices this year, which decreased our sales volume. But the price increases have not kept pace with the increase in costs. We will need to increase prices at a higher rate.”
“Slight increase in orders, no increase in margin. Doing more production with less people.”
“Shipping is down some, but new orders are up.”
“Labor market is critically low.”
“Our volume has taken a massive hit. Our two biggest customers have placed their lowest revenue year in 2024 and will be even lower in 2025. Struggling to find new customers to replace the missing volume.”
“All available resources are focused on finding new business volume.”
“Overall order activity is more stable than early this year, late last year.”