By Xavier Fontdegloria
Manufacturing activity in central U.S. expanded in March at the quickest pace on record as growth in production and shipments increased sharply compared with the previous month, according to data from a survey released Thursday by the Federal Reserve Bank of Kansas City.
The Tenth District manufacturing survey’s composite index increased to 37 in March from 29 in February, topping the 27 consensus forecast from economists polled by The Wall Street Journal. This is the highest reading since the survey’s inception in July 2001.
The indicator gauges manufacturing activity of firms located in the western third of Missouri, all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming, and the northern half of New Mexico. A value greater than zero suggest growth.
“Regional factory activity increased at a record pace in March,” said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.
In March, growth was led by sectors such as printing and paper, plastics, electrical equipment, furniture and related product manufacturing, and especially transportation equipment, the report said.
The production index rose to 46 from 31 the previous month, signaling that the majority of firms experienced increases in output over the month.
Demand also strengthened, the data showed. The volume of shipments index almost doubled to 46 from 24 the previous month, and the volume of new orders index edged up slightly to 33 from 32.
The employment index fell to 18 from 26, but still signaled that companies in the area created jobs.
Supply-side bottlenecks showed signs of worsening. The backlogs of orders index increased to 29 from 22, and the supplier delivery time index rose sharply to 55 from 36 the previous month.
Prices pressures intensified over the month, according to the survey. The index of prices paid for raw materials climbed to 81 from 64, and the index of prices received for finished products increased to 51 from 47.
Expectations for future activity remained solid. The future composite index, which relates to the outlook in the next six months, increased to 41 in March from 38 in February, suggesting broad optimism among the firms polled. More firms expected increases in production, shipments, new orders, finished products, and supplier delivery times in the months ahead, the Kansas City Fed said.
Write to Xavier Fontdegloria at [email protected]
