Factory activity in the central U.S. accelerated sharply in September, according to a Federal Reserve Bank of Kansas City survey released Thursday. It was the latest in a series of reports pointing to an economy gathering momentum heading into the fourth quarter.
The Kansas City Fed’s composite index of manufacturing activity rose to 14 from 10 in August and 9 in July. Economists had expected the gauge to slip to 8. The reading was the strongest in more than a year and marked the fourth straight month of double-digit or near-double-digit gains. Readings above zero indicate expansion.
Demand drove the September gain. The survey’s new-orders index jumped to 24 from 16, and the order-backlog measure rose to 13 from 4. The production index climbed to 20, and shipments rose to 21. Every month-over-month component of the survey was at or above zero.
“District manufacturing activity continued to rise,” said Cortney Cowley, an assistant vice president at the Kansas City Fed and executive of its Oklahoma City branch. Growth was broad-based across durable and nondurable goods producers, the bank said, led by makers of plastics and rubber products and furniture-related goods.
The Kansas City report came a day after a nationwide survey showed U.S. business activity expanding at its fastest pace in years. The headline flash S&P Global US PMI Composite Output Index rose from 56.0 in August to 58.4 in September, registering the strongest expansion since July 2021. Manufacturing rose to 57.0 from 53.9, and services improved to 58.7, according to the flash estimates.
“US business continues to boom,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. He added that historical comparisons suggest the survey data point to annualized growth of around 5 percent, with a 4 percent gain signaled for the third quarter as a whole.
In the S&P Global factory survey, production growth revived after having waned over the prior three months, reaching its fastest since April 2022, as new orders growth also accelerated to the fastest in nearly four-and-a-half years.
PMI
Manufacturers in the Kansas City Fed’s district, which covers Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri, reported expanding the workweek, which is a positive for worker paychecks. The average-workweek index surged to 13 from 1. Supplier delivery times lengthened, another sign of strong demand, and finished-goods inventories rose.
Hiring was the one measure that failed to keep pace. The survey’s employment index held at zero for a second straight month. This is likely a reflection of a very tight labor market, with unemployment low and jobless claims this year lower than any Jan-Sept period since 1969. Some executives said they were turning to automation rather than adding workers. “We have an increase in new business for the next year of over 30 percent,” one respondent wrote. “We will try to automate as much as possible to minimize the need for additional headcount.”
The outlook among regional factory managers remained upbeat. The Kansas City Fed’s index of expected activity six months ahead was 19, little changed from 20 in August. Expected production held at 36, and expected new orders stood at 31. Compared with a year earlier, the composite index was 15, down slightly from 16 in August.
“Things are starting to look very good for us for the 4th quarter in terms of new orders and shipped orders,” one manufacturer said.
The survey also asked firms how steep a sales decline would push them to cut staff. The most common response, from 26% of firms, was a drop of 5 percent to 10 percent. Only 11 percent said they were already planning reductions.
The Kansas City Fed survey was conducted Sept. 16–21 and drew 101 responses.
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