Manufacturing activity in the central part of the U.S. expanded in March at a faster pace than the previous month, data from a survey from the Federal Reserve Bank of Kansas City showed Thursday.
The Tenth District Manufacturing Survey’s composite index was 26 in March, up from 24 in February. Economists polled by The Wall Street Journal expected the indicator to come in at 25.
The index, which takes into account factors such as production and employment, covers 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 expansion, while values below zero indicate contraction. March marks the tenth consecutive month in which the index remains in growth territory.
“Regional factories continued to report solid growth in March,” Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, said.
Manufacturing activity growth was driven by durable goods plants for primary metals, machinery, transportation equipment, furniture, and miscellaneous manufacturing, the Kansas City Fed said.
The composite index is an average of the production, new orders, employment, supplier delivery time and raw materials inventory indexes. Month-over-month, indexes for shipments, new orders, and order backlog expanded at a faster pace in March and supplier delivery time was very high as well. Growth in production and employment remained positive, but slightly slower than in recent months.
The production index went down to 23 from 26 the previous month, while the volume of new orders increased significantly to 37 in March from 16 in February.
The employment index fell to 17 from 21, supplier delivery time increased to 41 from 40, and raw materials inventory index fell to 11 from 16 the previous month.
Prices paid for raw materials remained very high, and the index continued to hover near historically high levels. Prices received for finished products also increased further from a month ago and a year ago. Moving forward, district firms expected prices for both raw materials and finished goods to rise more over the next six months, the Kansas City Fed said.
“Materials prices remain extremely high for most firms. However, many manufacturers have been able to pass through at least a portion of the price increases on to customers,” Mr. Wilkerson said.
Manufacturing firms expectations about the near-term outlook improved. The future composite index, which relates to the outlook in the next six month, rose to 35 from 34 in February, with an uptick in employment expectations.
The six-month production index remained at 45, the data showed.