By Xavier Fontdegloria

 

Manufacturing activity in the central U.S. region expanded marginally in September, broadly at the same pace as it did in August, according to data from the Federal Reserve Bank of Kansas City released Thursday.

The Tenth District manufacturing survey's composite index fell to 1 in September from 3 in August, the lowest reading since July 2020. Economists polled by The Wall Street Journal expected the index to come in at 5.

The indicator gauges manufacturing activity of firms located in the western third of Missouri, all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming, and the northern half of New Mexico. A value greater than zero signals that activity in the region grew over the month.

"Regional factory activity was sluggish overall in September," said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.

The slower pace in factory growth in September was driven by decreased activity at durable goods plants, especially electrical, furniture, nonmetallic mineral, primary metal, fabricated metal and transportation equipment manufacturing, The Kansas City Fed said.

The production index increased to 2 in September from minus 9 in August, suggesting output increased slightly over the month.

Demand remained depressed, according to the data. The volume of shipments index increased to zero from minus 13, signaling stable shipments, and the volume of new orders index rose slightly to minus 11, indicating falling orders.

"I'm told our customers are overstocked with our products, so a correction is taking place," one of the respondents of the survey said.

The employment index was stable at 10, in a sign that firms continued to hire workers at a steady pace.

Supply-chain snarls eased markedly, data from the survey showed. The backlogs of orders index increased slightly to minus 4, but still pointed to a decrease in backlogs, and the supplier delivery time index fell sharply to minus 2, suggesting that delivery times shortened compared with the prior month.

Inflation pressures gained pace. The index of prices paid for raw materials rose to 41 from 38, and the index of prices received for finished products increased to 27 from 25.

Firms were moderately optimistic about the short-term outlook. The future composite index--which gauges the outlook in the next six months--decreased to 9 from 10, and most of those surveyed expect further price increases.

 

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

 

(END) Dow Jones Newswires

September 22, 2022 11:41 ET (15:41 GMT)

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