Manufacturing Activity in Central U.S. Quickens Slightly in October --Kansas City Fed

October 22, 2020 at 11:35 am EDT

By Xavier Fontdegloria

Manufacturing activity in the central part of the U.S. expanded in October for a fifth consecutive month, at a slightly faster pace than that of September, data from a monthly survey from the Federal Reserve Bank of Kansas City showed Thursday.

The Tenth District Manufacturing Survey's composite index stood at 13 in October, up from September's 11 reading. Economists polled by FactSet expected the indicator to remain steady at 11.

The index, which takes into account factors like 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.

Manufacturing activity in the area is above February's pre-pandemic levels, when the index stood at 5.

"Regional factory activity expanded in October but remained below year-ago levels for over half of firms," said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.

Activity at non-durable and durable goods factories expanded at a similar pace, with faster increases at fabricated metal and machinery plants, 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 remained positive, indicating continued expansion. On an annual basis, most factory indexes remained negative, but less so than last month.

The production index increased to 23 from September's 18 reading, signalling output is expanding at a faster pace. New orders also climbed three points to 26.

The employment index slightly grew to 9, while supplier delivery time eased to 7 from 13 the prior month. The raw materials inventory index swung to expansion.

Manufacturing firms were moderately optimistic about the near-term outlook. The future composite index, which relates to the outlook in the next six months, came in at 21 in October, up from 18 in September.

To the question of how business indicators compare to pre-pandemic levels and expectations after Covid-19, more than 55% of firms indicated employment levels were already even with or exceeding pre-pandemic levels, but around 15% didn't expect employment to fully rebound until 2022 or 2023.

In terms of revenues, only 35% of firms said sales levels were at or above pre-pandemic levels.

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