Tenth District Factory Activity Gains Ground

Manufacturing activity grew at a faster pace in the Tenth District in June, with the month-over-month composite index rising to 11 in June from 8 in May. Meanwhile, expectations for future activity were unchanged at 19. The month-over-month activity growth was due to gains in both durable and nondurable manufacturing. At the same time, all indices were positive except for inventories, as the index for finished goods inventories fell 14 points to −5 in June. 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 and shipments indices both improved in June, advancing from 9 to 19 and from 7 to 20, respectively. Meanwhile, new orders stayed the same at 13, while the employment index turned positive, climbing from −4 to 10 in June. The backlog of orders index declined from 14 to 4. At the same time, the pace of growth for prices paid and prices received grew, moving up from 63 to 68 and from 29 to 33, respectively. Furthermore, the indices for prices received and paid both stepped down over the year, decreasing to 70 and 84, respectively.

In June, survey respondents were asked special questions about their ability to pass through prices and expectations of supply chain changes. Almost two-fifths (38%) reported they are able to pass through 0% to 20% of the higher costs from input and labor, 10% of firms can pass through 20% to 40%, 10% can pass through 40% to 60%, 11% can pass through 60% to 80%, 19% can pass through 80% to 100% and 8% of respondents had to decrease prices. When asked about expectations for supply chain disruptions and shortages in the next six months, 46% of firms expect no change, 24% expect them to decrease. Further, 30% expect to see an increase in disruptions and shortages going forward.