By Xavier Fontdegloria

Manufacturing activity in the central part of the U.S. continued to expand in September for the fourth consecutive month, though at a slower pace than that of August, data from a monthly survey from the Federal Reserve Bank of Kansas City showed Thursday.

The Tenth District Manufacturing Survey's composite index decreased to 11 in September, down from August's 14 reading. Economists polled by FactSet expected the indicator to fall to 8.5.

The index, which takes into account factors like production and employment, covers the western third of Missouri, all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming, and the northern half of New Mexico. Values greater than zero generally suggest expansion, while values below zero indicate contraction.

Despite the fall in September, manufacturing activity in the area is still above February's pre-pandemic levels, when the index stood at 5.

"Regional factory activity expanded again in September but was still below year-ago levels for the majority of firms," Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, said in prepared remarks.

Activity at non-durable and durable goods factories expanded at a similar pace in September, although the increase in activity at food and beverage manufacturers was slower than in previous months, the Kansas City Fed said.

The composite index is an average of the production, new orders, employment, supplier delivery time and raw materials inventory indexes. Most month-over-month indexes remained positive, indicating continued expansion.

The production index decreased to 18 from August's 23 reading, signaling output is expanding but at a slower level than the prior month, data showed. New orders index decreased to 23 from 26.

The employment index slightly eased to 7, remaining in growth territory. Supplier delivery time increased to 13 and the raw materials inventory index fell back to contraction.

Manufacturing firms were moderately optimistic about the near-term outlook. The future composite index, which relates to the outlook in the next six months, stood at 18 in September, similar to expectations in August.

"Firms' expectations for future activity continued to be relatively optimistic, although they anticipated slightly lower wage and salary growth in the year ahead," Mr. Wilkerson said.

To the question about wages for workers that were furloughed and then rehired, most respondents indicated that wages were the same as before. In the next six months, more than 60% of firms expected to identify and hire new employees.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

September 24, 2020 11:28 ET (15:28 GMT)