Kansas City Fed Manufacturing: Resilience Despite Moderation

Research evidence excerpt

Kansas City Fed Manufacturing: Resilience Despite Moderation

UpdateM

Kansas City Fed Manufacturing: Resilience Despite

Moderation

Manufacturing activity moderated but remained strong in July, according to the Federal

Reserve Bank of Kansas City’s Manufacturing Survey. The headline composite index was 9

in July, down from 11 in June yet meaningfully above its six-month average of 7.5.

Demand and production showed strength despite the moderation. The production index

fell 2 points to 17, still marking its sixth consecutive month of expansion. Meanwhile, the

new orders index decreased 3 points to 10. Both indices have shown persistent strength

since February 2026. A moderate pullback does not seem surprising and is not viewed as a

negative signal for the local manufacturing sector.

Labor demand in the manufacturing sector improved. The number of employees index fell

to 2 from 10, yet remained in expansion The hours worked index increased to 4 from 2.

Supply chain & inventories: Delivery times lengthened again in July, although at a slightly

slower pace. The index fell to 15 from 16 and has stayed in expansion since January 2025.

Finished goods inventories increased 20 points to 5, whereas raw materials rose 4 points

to 3. These movements, together, suggest that the longer delivery times were likely driven

by stronger demand rather than by a disruption in the supply chain.

Prices: Both prices paid and prices received decelerated meaningfully. The prices paid

index eased to 52 from 68, possibly reflecting easing energy prices. However, it is likely

that the survey responses did not capture the recent rebound in energy prices due to the

survey's timing. The prices received index fell to 28 from 33, echoing our view that tariff

pass-through is coming to an end.