The Kansas City Federal Reserve Bank said that manufacturing activity expanded at a 79-month high in the latest survey data. The composite index of general business conditions rose from 17 in September to 23 in October, a level not seen since March 2011 and a sign that sentiment has continued to strengthen since the spring. The higher figure in October came largely from a jump in those saying that new orders (up from 10 to 27) and employment (up from 18 to 21) had both accelerated, with the hiring figure also at a 79-month high. The sample comments tended to echo the challenge of finding talent. One respondent said, “Qualified, available and reliable labor (primarily hourly) continues to be the number one issue negatively impacting our potential growth.”
Production (down from 22 to 20), shipments (unchanged at 25) and employment (up from 18 to 21) indicated robust expansions for the month, as well, and exports (up from 6 to 8) continued to grow modestly. All of these data points reflect a manufacturing sector in the district that has improved significantly, with the composite measure positive for the 14th straight month.
Meanwhile, manufacturers continued to be optimistic about the next six months. The forward-looking composite index increased from 26 to 32, its highest point since March. Sixty-one percent of those completing the survey expect production and shipments to rise in the coming months, with 55 percent forecasting higher sales, 47 percent predicting more employment and 37 percent seeing additional capital spending. In addition, more than half of business leaders also predict a pickup in raw material costs over the next six months, consistent with the acceleration in input prices seen in other measures.