Manufacturing activity in the central U.S. slowed in May from the previous month, according to a survey conducted by the Federal Reserve Bank of Kansas City on Thursday.
The Composites Manufacturing Survey Index for the Tenth Region continued to slow, falling from 25 in April to 23 in May, causing the index to drop 12 points from the previous month.
The results did not meet expectations. Economists surveyed by Econoday expect the index to rise to 32 and approach 37 in February.
The decline was not as the Fed’s regional banks in New York, Philadelphia and Richmond reported in the past 10 days. The New York and Richmond indices were negative this month, pointing to a recession. The Philadelphia Federal Reserve Bank index fell to 2.6 from 17.6 last month, barely staying in positive territory. The fact that all these declines were worse than expected suggests that economists underestimated the slowdown that hit the manufacturing sector in May.
Production continued to decline, falling from 28 to 19 in April and to 46 in March. Shipments also fell for the second month in a row. Inventories of raw materials and finished products also fell sharply for the second month in a row.
Producers’ six-month production, shipment and inventory expectations fell for the second month in a row. The outlook for commodity inventories worsened after the increase in April.
Inflationary measures have eased somewhat, but remain at historically high levels. Forty-eight percent of manufacturers say that the prices of their products have increased compared to a month ago, and a similar percentage say that prices have not changed. Only four percent reported a price cut. Ninety percent reported a wage in the past year. 77 percent said that they paid more for raw materials, 18 percent said that there was no change in material cost, and 6 percent paid less. 97% reported paying more than a year ago.
The outlook for raw material and finished product prices remained strong, but fell from recent highs.
This month, the Kansas City Federal Reserve asked what it calls “specific questions” about rising material prices, supply chain disruptions/scarcity, and wage and price expectations. 92% of manufacturers reported that their business has been affected by rising material prices, shortages and extended delivery times. Eighty-seven percent say these cuts will last at least 6 months or longer. More than 59 percent of companies stated that they expect wages and prices to increase faster than last year, adding that their inflation expectations have changed compared to previous levels and they expect companies to continue to accelerate inflation.
The situation in the labor market has become even more difficult. The number of employees rose to a one-year high and the number of hours worked increased. Expectations for wages and working hours have remained the same over the past month.
The manufacturers’ comments highlight that supply chain disruptions, labor market pressures and inflation are brought on by companies.
- “We continue to have difficulties getting people in. In some cases, we’ve increased fees by 20% over the last few years. This
The trend is disturbing. ” - “The job market is still crowded. We need to attract employees from other companies. ”
- “Keeping up with rising material costs and finding new ways to attract workers is a challenge. Electric
the labor pool is depressing at best. 50% did not show up for the interview and 30% did not pass the drug test. ” - “The most difficult period of the 29 years I have spent in our business life – energy costs, labor shortage, increasing raw material prices and disruptions in raw material supply – has been a constant and endless resource. inventory that binds our money. We don’t see any signs of improvement in any of these issues for at least the next 6 months. Like others, we try to avoid price increases, but keeping up with rising costs is difficult.”
- “There is a very disturbing cycle of high inflation that is causing serious problems for people who commute. This leads to higher wages and companies are forced to raise prices once again. At some point the United States will become uncompetitive in the world and may reduce demand.”
- “Our non-primary cost (steel) continues to rise. Prices for manufacturing materials and spare parts are rising and becoming more scarce. This forces us to increase our investment in this type of non-production inventory to balance lead time and availability. ”
- “Supply chain issues and rising raw material prices will continue into next year, driving up the prices of our finished products.”
- “Inflation did not only affect the pricing of raw materials, freight and products, we see a noticeable softness in the market, which, in our opinion, is due to the public’s tendency to save. Just take what you need and don’t eat out.”
There is good news in the report. Growth in supplier delivery times slowed, indicating an improvement in the supply chain despite increased backlog. New orders grew faster, as did export orders.
Manufacturers said they expect increased backlogs, new export orders and increased delivery times to suppliers in six months.
Capital expenditure figures increased year-on-year, but expected capital expenditures declined.
“Growth rates for regional businesses have slowed a bit, but remain strong,” said Chad Wilkerson, economist at the Kansas City Federal Reserve Bank. “Companies continue to report adverse effects from higher inflation and tighter supply. About 70% of all companies reported more severe supply disruptions and shortages compared to 2021, with most conditions expected to last six months or longer.
The survey included growers in the western third of Missouri, all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming, and the northern half of New Mexico.
Source: Breitbart
