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Factory Activity in Central U.S. Extended Momentum into January — Kansas City Fed

By Xavier Fontdegloria

Manufacturing activity in the central region of the U.S. grew at broadly the same pace in January compared with the previous month, according to a survey from the Federal Reserve Bank of Kansas City released Thursday.

The Tenth District manufacturing survey’s composite index increased to 24 in January from a revised 22 in December, in line with the forecast from economists polled by The Wall Street Journal.

The indicator gauges manufacturing activity in 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 expanded at a faster pace in January,” said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.

Factory growth was driven mainly by activity at durable goods plants, especially primary metals, machinery, electrical, furniture and transportation equipment manufacturing, the Kansas City Fed said.

The production index increased to 20 from 11 the previous month, suggesting that output grew at a faster pace in January.

Demand slowed over the month, according to the survey. The volume of shipments index fell to five from 13, and the volume of new orders index declined to 14 from 22 the prior month.

The employment index increased to 24 from 18, signaling that firms in the area created jobs at a faster pace. However, more than half of firms indicated that 10% or more of their workers were out at some point in January due to Covid-19, Mr. Wilkerson said.

“Covid-19 isolations and quarantines lead to construction delays for labor shortages, and increased supplier lead times for the same reason,” one of the respondents said.

Supply-side bottlenecks showed further signs of easing, with the supplier delivery time index falling for the second consecutive month, to 38.

However, price pressures remained high. The index of prices paid for raw materials fell slightly to 64 from 67 the previous month, and the index of prices received for finished products increased to 49 from 46.

Expectations for future activity improved. The future composite index, which relates to the outlook in the next six months, increased to 37 in January from 26 in December. Expectations for future raw materials prices increased, and firms expect finished goods prices to expand at a faster rate over the next six months, the Kansas City Fed said.

Write to Xavier Fontdegloria at [email protected]

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