September 2026 Survey

Factory Activity Continued to Increase

The month-over-month composite index was 14 in September, up from 10 in August and 9 in July (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Both durable and nondurable manufacturing activity increased, driven primarily by plastics and rubber products and furniture-related products. All month-over-month indexes were positive. The average employee workweek index rose moderately. The year-over-year composite index eased from 16 to 15, and most indexes were positive except for new orders for exports and the employment index. Expectations for future activity remained expansionary with the composite index at 19.

Special Questions

This month, contacts were asked special questions about conditions to reduce headcount and investments/capital spending and retirement for current workforce. Almost a quarter (22%) of firms cited their sales would have to see a decline of 10% to less than 20% to decrease their investments/capital expenditures, 21% would not reduce, 17% cited a decline of 5% to less than 10%, 16% of firms are planning cuts, 15% cited a decline of 20% to less than 30%, 6% cited a decline of less than 5%, and 3% cited a decline of 30% or more before reducing their investments/capital expenditures. Nearly a third (26%) of firms cited their sales would have to see a decline of 5% to less than 10% to decrease their headcount, 22% cited a decline of 10% to less than 20%, 13% cited a decline of 20% to less than 30%, 12% would not reduce, 11% of firms are planning cuts, 10% cited a decline of less than 5%, and 6% cited a decline of 30% or more before reducing their headcount (Chart 2). Firms were also asked what share of their workforce is close to retirement eligibility. Half of firms cited less than 10% of their current workforce is within 5 years of retirement eligibility, 29% cited 10-20%, 12% cited 20-30%, 7% cited more than 30%, 3% were not appliable or unable to estimate (Chart 3).

Selected Manufacturing Comments

"Things are starting to look very good for us for the 4th quarter in terms of new orders and shipped orders."

"Business continues to weaken and cost continue to rise. Our workers deserve higher wages, but the profit isn't available to support more."

"We are getting hit every single month with price increases."

"We have an increase in new business for the next year of over 30%. We will try to automate as much as possible to minimize the need for additional headcount."

"Ongoing theme for the past two years - lack of consistent economic and tariff policies coupled with global geo-political instability makes every decision exponentially more difficult and risky. It overhangs the decision-making process resulting in a tendency to restrain growth and investments, regardless of sales."

"Grave concerns about energy costs and the impact on cost/pricing. Prices to customers are going to go up and go up significantly if something doesn't change quickly. We are looking at a huge new round of inflation. Perhaps even scarcity of supply. Very tenuous at the moment."

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About Manufacturing Survey

The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.

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