Input Stories

Manufacturing activity ticked up slightly in the Tenth District in July, with the month-over-month composite index up three points to 1. Meanwhile, expectations for future activity remained expansionary but slipped one point to 8. 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 month-over-month rise in activity was due primarily to increases in nondurable manufacturing, while durable manufacturing continued to fall. New orders modestly increased and turned positive. On the other hand, production contracted. Shipments rose, but at a slower pace than the prior month, falling from 8 to 3. Meanwhile, employment and new orders for exports declined and at a faster pace than in June.

Production fell from 5 to -3, while new orders inched up from -2 to 2. New export orders decreased from -10 to -15 over the month. Employment slumped again in July, falling from -8 to -11, and the average employee workweek also became more negative, declining from -5 to -9. The backlog of orders plummeted from -11 to -30. Both prices received and prices paid for raw materials eased month-over-month, with raw material prices slipping from 51 to 47 and prices received decreasing three points to 18. Over the year, prices received ticked down four points to 58, while prices for raw materials fell from 75 to 67.

In July, survey respondents were asked about profitability and passthrough ability, and the responses on changes in firms’ profit margins were mixed. Thirty-five percent of firms reported slight decreases in profit margins compared to the previous quarter, while 21% reported a significant decline. Meanwhile, 21% reported no change and 20% reported a slight increase. Just 3% of respondents reported a significant increase. When firms were asked about their ability to pass along the costs of rising input prices on to consumers, one-third of firms (33%) shared a slightly increased ability, while another 33% reported no change in passthrough ability. On the other hand, 31% cited an increased hardship passing along higher costs, while 3% found considerably increased ability to pass along prices. Looking to the next 12 months, 32% of firms expect their margins to decrease slightly, 10% expect significant declines, 26% expect no change, 29% expect a slight increase and 3% expect significant increases.