Kansas City Fed Manufacturing Index Less Negative in October

The Kansas City Fed manufacturing composite index was at -4 in October, up from -8 in September and slightly down from -3 in August, the October Manufacturing Survey by the Federal Reserve Bank of Kansas City showed, indicating Tenth District manufacturing activity declined modestly this month. The October index, negative for the 14th straight month, was up from -6 in October 2023 but well below a peak of 31 in March 2022. “The decline was present in both durable and nondurable goods, particularly chemical, steel, and beverage manufacturing,” the Kansas City Fed reported.

The ISM-adjusted index calculated by Haver Analytics rebounded to 47.3 (NSA) in October after a 3.4-point decline to 44.0 in September, indicating a contraction in factory activity for the fifth consecutive month but at a less severe pace. The latest ISM-adjusted figure was above 45.3 in October 2023 but well below a record-high 68.9 in March 2022.

In the latest survey, the new orders index was less negative in October, rising to -5 after a two-point decline to -14 in September; the October index registered the 27th straight negative reading and the highest since February. Twenty-nine percent of respondents (NSA) reported orders gains in October while 38% reported declines. The production index jumped to zero this month after a 24-point plunge to -18 in September; these readings were well below a high of 36 in March 2022. The shipments index rebounded to 7 in October, the first positive reading and the highest since May, after an 11-point drop to -12 in September; however, having remained down from a peak of 40 in March 2022.

The raw materials inventory index dropped to -10 in October, the eighth negative reading in 10 months, following a four-point increase to 4 in September; these figures were well below a high of 28 in March 2022. The order backlog index rose to -14 this month, the 27th consecutive negative reading, after dropping to -33 in September; these numbers were significantly below a record-high 43 in July 2021. The supplier delivery time index increased to -1 in October, the fourth successive negative reading, from -2 in September; these readings were well below a high of 51 in March 2022.

On the labor front, the employment index increased to -2 in October following a four-point decline to -11 in September, posting the fifth straight negative reading and the highest level since a positive 9 in May. The index was down from a high of 30 in May 2022. Fifteen percent of respondents (NSA) reported increases in the number of employees in October while 19% reported decreases.

On the pricing front, the prices received index for finished products jumped to 11 in October, the highest level since May 2023, after an 11-point decrease to -5 in September. These readings remained well below a high of 50 in June 2022 and a record-high 62 in August 2021. An increased 18% of respondents (NSA) reported higher prices received in October while a lessened 11% reported price declines. The prices paid index for raw materials rose to 19 this month, the highest reading since May, after a five-point drop to 13 in September; nevertheless, having remained significantly down from a high of 73 in April 2022 and a record-high 87 in October 2021.

Expectations for future activity continued to stay positive, with activity in most categories expected to gain and raw materials prices expected to rise at a faster pace than finished product prices. The expectations index for six months ahead was at 7 in October, slightly down from 9 in September and 8 in August. The expectations indexes for production (27), shipments (21), and new orders (14) rose in October, while those for raw materials inventories (-14) and supplier delivery time (-7) dropped for the month. The expectations index for employment fell to 15 in October from 18 in September and the index for capital expenditures fell to 1 from 11; however, remaining in positive territory and indicating expansion. The expectations index for raw materials prices rebounded to 38 in October following a seven-point drop to 33 in September, while the index for finished goods prices rose to 35, the highest level since March 2023, after September’s 12-point jump to 33.

The latest survey was conducted for a six-day period from October 16-21, 2024 and included 103 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s SURVEYS database.