Tenth District Manufacturing Activity Shows Modest Growth, Expectations Improve
A new Federal Reserve Bank survey showed a gain in manufacturing activity in Oklahoma and the other states that make up the Tenth District of the Federal Reserve Bank of Kansas City.
According to Cortney Cowley, assistant vice president and Oklahoma City Branch executive, the survey revealed that Tenth District manufacturing rose slightly, while expectations for future activity ticked up.
“Regional manufacturing activity increased from last month and is up modestly year-over-year for the first time since May 2023,” said Cowley. “Price growth cooled slightly from last month, but nearly half of firms reported changing prices more often than last year.”
Although still positive, growth in indexes for the price of finished products and the price of raw materials eased slightly from last month.
Durable vs. Nondurable Manufacturing Trends
Nondurable manufacturing activity declined further, while durable manufacturing activity edged higher, driven by primary metal and electrical equipment manufacturing. The month-over-month indexes were all positive except for the employment index, which fell modestly. The production and new orders indexes grew moderately.
Most year-over-year indexes were positive except for those tracking employment, backlog of orders, and finished goods inventory. Expectations for future activity ticked up with the composite index increasing, as expectations for employment edged higher.
These trends suggest ongoing resilience across key industrial sectors tied to energy supply chains, equipment manufacturing, and infrastructure investment in the region.
Special Questions on Price Pass-Through
This month, contacts were asked special questions about their ability to pass through prices and their frequency of price changes.
Nearly one third (30%) of firms reported that they are currently able to pass through 0-20% of the higher costs from inputs and labor, 10% of firms are able to pass through 20-40%, 15% are able to pass through 40-60%, 13% can pass through 60-80%, 28% can pass through 80-100%, and 4% of firms had to decrease prices.
One third of firms reported that they will be able to pass through 0-20% of higher costs in the next 12 months, 11% of firms will be able to pass through 20-40%, 9% will be able to pass through 40-60%, 14% will pass through 60-80%, 29% will pass through 80-100%, 1% will be able to pass through more than 100%, and 3% of firms had to decrease price.
Firms were also asked about price changes compared with last year. Almost half of firms (46%) reported no change in the frequency of price changes compared with last year, 12% reported they are changing their prices much more often than last year, 36% are changing somewhat more often, 4% are changing somewhat less often, and 2% of firms are changing prices much less often.
Selected Manufacturing Comments from Industry Contacts
“Customers are becoming very price/cost sensitive.”
“Labor and supply issues (and uncertainty) are impacting us.”
“Labor retention appears to be stabilizing. We are seeing the increase in productivity.”
“There is still a good share of uncertainty in the market. Companies seem hesitant to commit to any long-term purchases.”
“Lack of skilled labor is still the top threat to be able to grow company.”
“Data center activity is high.”
“Plenty of uncertainty yet also incredible opportunities.”
“We are investing in AI technology to reduce the response time.”
Federal Reserve Tenth District Overview
The Federal Reserve Bank of Kansas City serves the Tenth Federal Reserve District, encompassing the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico. The region includes a wide cross-section of energy, agriculture, and manufacturing economies that influence national industrial output and supply chain performance.