Kansas City Fed Manufacturing Remains in Contraction

The Kansas City Fed’s Manufacturing Production Index remained in negative territory at -2 in January 2026, little changed from -3 in December, indicating the second consecutive month of contraction in factory activity. Expectations for future activity cooled but remained expansionary. Prices paid for raw materials increased further this month, while finished product prices growth cooled.

The Kansas City Fed’s Manufacturing Production Index fell to -3 in December 2025, from an over 3-1/2-year high of 18 in November, marking the first contraction in manufacturing since July, albeit mild. Growth in both durable and nondurable manufacturing eased from last month, led by declines in food, metal, and transportation equipment production. Month-over-month indexes were mixed: production and employment slipped slightly into negative territory after strong readings in the previous month, while shipment and new order volumes remained unchanged at 0. Year-over-year indexes were mostly negative and lower than last month, with production and shipments declining and employment falling from 5 to -7. In contrast, capital expenditures rose from 9 to 14, and new orders ticked up from -3 to 2. Expectations for future activity remained positive, with the composite index increasing from 9 to 13.

The Kansas City Fed’s Manufacturing Production Index climbed to 18 in November 2025, the highest since April 2022, from 15 in October, indicating a notable pickup in manufacturing expansion. Factory activity saw slight gains in both durable and nondurable sectors. Food and printing boosted nondurable growth, and machinery and furniture supported durable gains. Month over month indexes were mostly positive, aside from new export orders and the average workweek, with production and shipments rising moderately. Regarding price dynamics, price growth for finished products and raw materials eased slightly from last month. Year over year, most indexes were negative, except for supplier delivery times and capital expenditures, and production and employment indexes remained in negative territory.