Manufacturing Activity in Central U.S. Held Up at Strong Levels in July -- Kansas City Fed

Factory activity in the central part of the U.S. expanded in July at a slightly faster pace compared with June, data from a survey from the Federal Reserve Bank of Kansas City showed Thursday.

The Tenth District Manufacturing Survey's composite index increased to 30 in July from 27 in June. Economists polled by The Wall Street Journal expected the index to come in at 25.

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. Values greater than zero suggest growth, while values below zero indicate contraction. The index has been in expansion territory since June 2020.

"Regional factory activity continued to expand in July and expectations remain positive," said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.

Growth in the region's manufacturing sector was supported in July by increased activity at durable goods plants, especially primary and fabricated metals, computer and electronic products, transportation equipment and furniture manufacturing.

The month-over-month indexes for shipments, new orders, order backlog and new orders for exports rose at a faster pace in July, and supplier delivery time increased. Inventories remained positive but eased slightly from last month, the Kansas City Fed said.

Demand for goods continued to be robust in July, the data showed. The production index rose to 41 from 30 the previous month, the volume of shipments index increased to 37 from 20, and the volume of new orders climbed to 26 from 22.

The employment index continue to signal payroll gains and remained broadly stable, to 27 in July from 26 in June.

Supply constrains showed no signs of abating. The supplier delivery time index increased to 39 in July, up one point from June. The raw materials inventory index fell to 15 from 21 the previous month.

Around 89% of firms reported supply-chain issues and 91% reported labor shortages, Mr. Wilkerson said. Many manufacturers have increased overtime for current workers and are raising starting wages to attract applicants, he said.

Price pressures remained high. The prices paid for raw materials index edged down one point to 78, while prices received for finished products index increased four points to 52.

"Inflation is rampant across the board," one of the companies polled said.

Manufacturing firms were optimistic about the short-term outlook. The future composite index, which relates to the outlook in the next six months, edged down to 33 in July from June's 37 record-high, still indicating solid expectations.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com -0-


  (END) Dow Jones Newswires
  07-22-21 1138ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.