Manufacturing Activity in Central U.S. Accelerates in January -- Kansas City Fed

By Xavier Fontdegloria

Manufacturing activity in the central part of the U.S. expanded in January at a quicker 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 came in at 17 in January, up from 14 in December. Economists polled by The Wall Street Journal expected the indicator to fall to 12.

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 generally suggest expansion, while values below zero indicate contraction. January marks the eighth consecutive month in which the index remains in growth territory.

"Regional factories reported more growth in January," said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.

Activity rose more at durable goods plants, driven by manufacturing of primary metals, machinery, electronics, 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 further in January.

The production index climbed to 22 from last month's 12, while the volume of new orders edged up slightly to 25 from 24 in December.

The employment index increased to 13 from last month's 7. Supplier delivery time rose to 22, while raw materials inventory index eased to 4. Prices paid for raw materials continued to rise rapidly, to the highest reading since 2011, the report said.

Manufacturing firms expectations about the near-term outlook rose further. The future composite index, which relates to the outlook in the next six months, expanded to the highest level in over a year at 24, up from 17 in December.

The six-month production index surged to 46 compared with 20 the previous month, data showed.

"Covid-19 vaccination is a key factor in manufacturers' overall business outlook for 2021, but with less impact on hiring and capital spending in the near-term," Mr. Wilkerson said.

Write to Xavier Fontdegloria at [e-mail]

(END) Dow Jones Newswires

01-28-21 1123ET