Tenth District manufacturing activity expanded at a slightly slower pace in August, with the composite index dropping back to around the rates of growth that prevailed in late 2017 and early 2018. Expectations for future growth remained solid, despite continued concerns about trade and tariffs. Price indexes moderated somewhat.

The month-over-month composite index was 14 in August, down from readings of 23 in July and 28 in June (Tables 1& 2, Chart 1). The composite index is an average of the production, new orders, employment, supplier delivery time and raw materials inventory indexes. Growth in factory activity remained relatively stable at nondurable goods plants,while durable goods activity slowed slightly, particularly for machinery, computers and electronics. Most month-over-month indexes moderated in August, but were still generally solid. The production, new orders, employment, and new orders for exports indexes all decreased modestly. In contrast, the shipments index rose from 12 to 18 after falling considerably last month. The finished goods inventory index dipped slightly, while the raw material inventory index was unchanged.

Most year-over-year factory indexes eased slightly in August. The composite index edged lower from 44 to 37, and the production, shipments, new orders, and order backlog indexes also fell. The employment index decreased from 47 to 33, and the new orders for exports index also moved lower. On the other hand, the capital expenditures index inched higher from 39 to 43. Both inventory indexes rose modestly.

Indexes for future factory activity were mostly lower, but still at high levels. The future composite index eased from 34 to 29, and the future production, shipments, and order backlog indexes also edged lower. The future employment index fell from 42 to 33, while the future new orders index was unchanged. The future capital expenditures index dipped from 38 to 28, its lowest level in eight months. The future raw materials index eased from 15 to 11, while the future finished goods inventory index inched higher.

Most price indexes moderated somewhat in August. The month-over-month raw materials price index fell from 52 to 44, while the finished goods price index was unchanged. The year-over-year finished goods price index edged lowerfrom 60 to 50, and the year-over-year raw materials price index also decreased modestly. The future finished goods price index dropped from 43 to 28, and the future raw materials price index also fell moderately.

Composite Index vs. a Month Ago

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Composite Index
Date Composite
17-Aug 16
17-Sep 18
17-Oct 22
17-Nov 15
17-Dec 13
18-Jan 16
18-Feb 17
18-Mar 17
18-Apr 26
18-May 29
18-Jun 28
18-Jul 23
18-Aug 14
18-Aug 10

Selected Comments

“Shipping costs have increased substantially in the last 3 months. So far we have not passed these costs on to our customers. At the same time lack of availability of LTL trucks has hurt our ability to ship on time.”

“It’s a struggle to find employees at all skill levels. Competition for employees is fierce and opportunities for higher wage positions seem to be readily available across the metro area.”

“Tariffs have hurt our industry. Material and component prices are up across the board. Everyone in the area is offering hiring bonuses to attract workers. In addition, our export demand is lower due to political reasons related to tariffs. U.S. economy is strong now, but our planning outlook is getting cloudy.”

“Tariffs and threats of tariffs is causing raw material increases that are eating away the benefit of a lower corporate tax rate. We are unable to pass along tariff caused increases, for items under contract.”

“Sales were off last month but expect it to be a temporary shift in production.”

“Effects of the tariffs and trade war are concerning. It creates uncertainty which is always bad for business.”

Survey Data

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About Manufacturing Survey

Author

Chad Wilkerson

Vice President, Economist and Oklahoma City Branch Executive

Chad Wilkerson is Branch Executive of the Kansas City Fed’s Oklahoma City Branch office. In this role, he serves as the Bank’s lead officer and regional economist in Oklahoma. He…