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Manufacturing Activity in Central U.S. Quickens in February — Kansas City Fed

By Xavier Fontdegloria

 

Manufacturing activity in the central part of the U.S. expanded in February at a faster pace than that of 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 24 in February, up from 17 in January. Economists polled by The Wall Street Journal expected the indicator to come in at 15.

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. February marks the ninth consecutive month in which the index remains in growth territory.

"Most businesses reported more production and shipments, despite some difficulties due to the extreme weather events recently" Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, said.

Manufacturing activity growth was driven by durable goods plants, specifically by primary and fabricated metals, machinery and transportation equipment, 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. Most month-over-month indexes increased at a faster pace in February, and year-over-year factory indexes were positive in the first time since February 2020.

The production index edged up to 26 from 22 the previous month, while the volume of new orders eased significantly to 16 in February from 25 in January.

The employment index climbed to 21 from 13, supplier delivery time increased to 40, and raw materials inventory index rose to 16 from 4 the previous month.

Prices paid for raw materials continued to increase, reaching the second highest pace of growth in the survey's history. Prices received for finished products also grew more from a month ago and a year ago, the Kansas City Fed said.

"Rising materials prices and shipping delays have negatively affected 85% of firms," Mr. Wilkerson said.

"We are raising our prices to our customers as fast as we can, due to our raw material costs blowing up," one of the respondents said.

Manufacturing firms expectations about the near-term outlook improved markedly. The future composite index, which relates to the outlook in the next six months rose to 34 from 24 in January, with an uptick in capital spending plans.

The six-month production index eased slightly to 44 from 46 the previous month, the data showed.

 

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

 

(END) Dow Jones Newswires

February 25, 2021 11:30 ET (16:30 GMT)

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