Kansas City Manufacturing Activity Strengthens as New Order Growth Accelerates
Manufacturing activity grew at a faster pace in the Tenth District in September, with the month-over-month composite index rising to 14 from 10 in August. Meanwhile, expectations for future activity edged down from 20 to 19. The month-over-month increase in activity was led by gains in plastics and rubber products and furniture manufacturing. Further, no indices were negative in September, indicating broad growth from the prior month. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico.
The production index rose from 17 to 20, and the shipments index stepped up from 17 to 21. Meanwhile, new orders jumped from 16 to 24, while the employment index stayed the same at 0. The backlog of orders index increased from 4 to 13. At the same time, the pace of growth for prices paid and prices received strengthened, moving up from 55 to 68 and from 36 to 37, respectively. Similarly, the indices for prices paid and prices received both rose over the year, increasing to 90 and 73, respectively.
In September, survey respondents were asked special questions about the conditions that would lead them to reduce headcount and investments as well as the retirement eligibility of their current workforce. Overall, 16% of firms are planning cuts to investments and capital expenditures, while 21% would not make cuts. Almost a quarter of firms (22%) would need to see sales decline 10% to 20% to reduce investments, with 17% citing a sales decline of 5% to less than 10% to make cuts. When asked about headcount, 11% of respondents are planning employment cuts, while 12% are not. Over a quarter of firms (26%) would need to see sales decline 5% to 10% to reduce headcount, while another 22% cited a decline of 10% to 20%. When asked about retirement eligibility, half of the firms reported less than 10% of their current workforce is within five years of eligibility, 29% answered 10% to 20%, 12% responded 20% to 30%, 7% cited more than 30% and 3% were unable to estimate.
