Manufacturing activity in the US Midwest region has demonstrated a modest rebound, moving to shallower contraction territory this month, according to a report from the Federal Reserve Bank of Kansas City released on Thursday. The composite manufacturing index has seen a slight improvement, edging up to minus 4 in October from minus 8 in September.
This reading surpassed market expectations; analysts had anticipated a reading of minus 7 according to a survey conducted by Bloomberg. Despite the overall decline in activity across both durable and nondurable goods, specific sectors such as chemical, steel, and beverage manufacturing notably faced challenges, as highlighted in the report. Megan Williams, Kansas City Fed survey manager, remarked, "Regional factory activity continued to edge down this month.
However, producers maintain a positive outlook for the coming months, as they are anticipating increases in production, new orders, and employment opportunities." The production index has rebounded to a neutral reading after previously plummeting to minus 18 in September, indicating a more stable outlook.
Additionally, shipments, which previously registered a negative reading of minus 12, swung positive to 7 in October. The improvement in new orders is also worth noting, as it increased from minus 14 to minus 5 month-over-month, signaling a potential turnaround in the manufacturing landscape according to the Kansas City Fed's data. Looking ahead, the seasonally adjusted composite index for a six-month outlook declined slightly to 7 in October from 9 in September.
A positive sign is seen in the future production index, which rose to 27 from 19, alongside an increase in shipments climbing to 21 from 10. The forward-looking indicator of new orders also saw an encouraging rise, increasing by two points to reach 14. On the employment front, the current index reflecting present expectations improved to minus 2 this month, recovering from a minus 11 reading in the prior period.
However, the future employment indicator saw a slight decrease, dipping to 15 from 18. In terms of pricing, the index reflecting current selling prices indicated growth, while the expectations for selling prices over a six-month horizon ticked up by two points to 35. In a separate release, the Federal Reserve Bank of Chicago reported that its monthly national activity index declined to minus 0.28 in September, down from August’s revised figure of minus 0.01.
Analysts surveyed by Bloomberg had anticipated a more favorable reading of 0.50, which would reflect an improvement over August's unrevised level of 0.12. The production indicators played a significant role, contributing minus 0.21 to the index in September, illustrating the sequential negative shift in manufacturing activity..