Manufacturing Activity Continues to Decline in Kansas City Fed District in March
by:Sandy Batten
|in:Economy in Brief
Summary
- The headline index increased to -2 in March from -5 in February.
- The index has not been positive, depicting growth, since September 2022.
- New orders fell more rapidly while shipments fell less rapidly.
- Employment continued to decline though at a slower rate than in February.
- Prices paid for inputs surged to highest reading since September 2022.
Manufacturing activity in the Kansas City Federal Reserve district continued to decline in March with the composite index of manufacturing conditions edging up to -2 from -5 in February. This is an index centered on zero with positive readings indicating growth while negative readings indicate contraction. The headline index has not been positive since September 2022. The March survey was open for a six-day period from March 19-24, 2025 and included 97 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.
Haver Analytics calculates an index based on the Kansas City results which is comparable to the ISM PMI series. Surprisingly, this index rose to 51.4 (NSA) in March, its first rise above the critical 50 level which separates expansion from contraction since May 2024. However, this index is not seasonally adjusted. When Haver’s seasonal adjustment program is applied, the seasonally adjusted index fell to 47.0 in March from 47.5 in February.
The nondurable manufacturing sector continued to drive the declines in March, particularly food, paper, and printing manufacturing. Most month-over-month indexes were negative, but many improved from last month’s readings. New orders fell more rapidly in March, posting a reading of -12 versus -7 in February. Shipments also continued to fall in March but more slowly than in February, posting a reading of -4 versus -11 in February. Production rebounded to +1 in March, its first positive reading since August 2024. The employment index fell again, to -4 in March from -14 in February, indicating that employment continued to fall but at a slower pace than in February.
The impact of higher tariffs was apparently demonstrated in another increase in the prices paid for inputs index to 42, its highest reading since September 2022, from 38 in February and 18 in January. Firms appear to be having some difficulty passing higher input prices on to finished goods prices. The prices received index slipped to 15 in March from 17 in February.
All year-over-year indexes were negative, except the price indexes and capital expenditures index. However, the pace of declines eased. The composite index increased from -18 to -7 in March. Production, shipments, new orders, and employment all fell moderately from this time last year. Capital expenditures edged up modestly from last year.
The composite index of expectations in six months decreased for the third consecutive month to 10 in March from 14 in February. Expected production fell to 24 from 30. Expected shipments declined to 20 from 28. Expected new orders slipped to 20 from 27. And expected employment fell to zero from 12. By contrast, expected capital expenditures increased to 13 from 9 in February.
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.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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