By Xavier Fontdegloria


Manufacturing activity in central U.S. contracted slightly in January, as it did during 2022's fourth-quarter, signaling the sector's persisting headwinds as demand dwindles amid rising interest rates.

The Federal Reserve Bank of Kansas City said Thursday that the Tenth District manufacturing survey's composite index rose to minus 1 in January from a revised minus 4 in December. Economists polled by The Wall Street Journal expected the index to come in at minus 10.

The indicator gauges manufacturing activity in the western third of Missouri, all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming, and the northern half of New Mexico. An index lower than zero suggests activity in the region contracted over the month.

"Regional factory activity was basically flat in January," said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.

The production index rose to minus 4 in January from minus six in December, signaling declining output. The new orders index rose to minus 8 from minus 15, suggesting orders contracted at a softer pace compared with the prior month.

"Overall demand is weaker for our products," one of the firms surveyed said.

The employment index was unchanged at 4, suggesting slight employment gains.

The supplier delivery time index rose to minus 1 from minus 3, pointing to shortening vendor lead times as supply-chain bottlenecks eased.

Inflation pressures picked up after easing over 2022. The index of prices paid for raw materials increased to 20 from 18, and the index of prices received for finished products rose to 16 from 15.

"Supply chain has improved, prices for materials are falling fast and delivery times are much better," said another respondent.

Firms were little optimistic about their short-term outlook. The future composite index--which gauges the outlook in the next six months--fell to 3 in January from 6 in December. Respondents continue to expect production and employment levels to increase over the next six months, the data showed.


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


(END) Dow Jones Newswires

01-26-23 1135ET