Report: Manufacturing steady, projections flat, raw material prices down
Thu, May 25, 2023 1:05 PM
By Joe Mueller, The Center Square
Manufacturing in the middle of America was steady in May and expectations are it will remain flat, according to a report from the Federal Reserve Bank of Kansas City.
The Manufacturing Survey for May found prices for raw materials have declined. It also found prices for finished goods decreased somewhat compared to the last month and the previous year. It projected prices will continue to drop during the next six months.
“Regional factory activity was largely unchanged in May,” said Chad Wilkerson, senior vice president at the Federal Reserve Bank of Kansas City, which covers western Missouri, Colorado, Kansas, Nebraska, northern New Mexico, Oklahoma and Wyoming. “Prices cooled significantly over the last month and year and are expected to cool further.”
The organization uses a composite index to assess the sector. It’s an average of indexes measuring production, new orders employment, supplier delivery time and raw materials. The May index was -1, up from -10 in April and 0 in March.
“The increase from last month was driven by both durable and non-durable goods, especially by paper, primary metal and miscellaneous durable goods manufacturing,” the report said. “Month-over-month indexes were mixed. The production, volume of shipments, volume of new orders, number of employees, and finished goods inventories indexes all increased closer to their March levels after a significant decline in April.”
The average employee workweek and new orders indexes were down slightly compared to April. All year-over-year indexes increased or remained close to April levels, except for price indexes, which dropped.
The report found the future composite index was modestly positive at 2. Most indexes on expectations for the next six months were similar to April projections. There were some increases in new orders and backlogs of orders.
The report asked respondents the question, “If your firm is facing higher costs (inputs and labor), what share of those increases are you able to pass through to customers in the form of higher prices?” Approximately 27% of firms responded they would pass zero to 20% of the increase to customers and 24% would pass 80% to 100% to purchasers.
Nationally, economic activity in the manufacturing sector contracted in April for the six consecutive month, according to the Institute for Supply Management. The decline followed a 28-month period of growth.
“The April composite index reading reflects companies continuing to manage outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period,” Timothy Fiore, chair of the Institute for Supply Management, said in a statement.