May 2026 Survey

Factory Activity Continued to Increase

The month-over-month composite index was 8 in May, down from 10 in April and 11 in March (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Durable manufacturing activity growth slowed further, driven by declines in transportation equipment, while nondurable manufacturing activity continued to increase, driven primarily by paper and printing manufacturing. Most month-over-month indexes were positive except for new orders for exports, employee count, and raw material inventories. The year-over-year composite index increased moderately from 6 to 17, as all indexes were positive except for new orders for exports, and most showed increases from last month. Expectations for future activity continued to increase slightly with the composite index increasing from 18 to 19, as expectations for employment increased.

Special Questions

This month, contacts were asked special questions about changes in input and output prices and hiring and capital investment plan changes. A quarter of firms reported their input prices are changing at about the same rate as last year, 65% reported their input prices are changing more often, and 10% reported their input prices are changing less often. Over half (53%) of firms reported their output prices are changing at about the same rate as 2025, 33% reported output prices are changing more often, and 14% reported their output prices are changing less often (Chart 2). Firms were also asked about any changes in their hiring and capital investment plans since the start of the year. Over half (58%) of firms have not changed their hiring plans since the start of the year, 22% expect to hire more workers, and 20% expect to hire less workers. Almost a quarter (23%) of firms expect to decrease capital investments, 15% expect to increase capital investments, and 62% of firms have not changed their capital investment plans (Chart 3).

Selected Manufacturing Comments

"Demand is slowly increasing with expectations for this slow pace of acceleration to continue through the balance of this year."

"As price pressures increase from customers and material prices continue to increase and employees continue to demand better wages and benefits, manufacturers are getting squeezed to operate razor thin margins leaving very little room for reinvestment in the company."

"Fuel costs are driving delivered prices up and increasing raw material prices."

"Fuel charges are having a detrimental effect on our business."

"Sales have come to a stop."

"Qualified applicants for open positions continue to be in shortage. We have significant open positions."

"Extremely worried about input costs."

"It has been hard to find employees; it is starting to effect business."

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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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