By Xavier Fontdegloria
Factory activity in central U.S. softened in April as growth of both demand and production cooled, data from a survey by the Federal Reserve Bank of Kansas City showed Thursday.
The Tenth District manufacturing survey's composite index fell to 25 in April from 37 in March, when it recorded the highest reading on record. Economists polled by The Wall Street Journal expected the index to come in at 34.
"The pace of regional factory growth eased somewhat but remained strong," said Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City.
The indicator gauges manufacturing activity of firms located in the western third of Missouri, all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming, and the northern half of New Mexico. A value greater than zero signals that activity grew over the month.
Growth in factory activity was driven by manufacturing of computer and electronic products, primary metals, and furniture. Growth in transportation equipment, electrical equipment, appliances, and food manufacturing declined, the Kansas City Fed said.
The production index fell sharply to 28 in April from 46 in March, but it still signaled increasing output.
Demand also cooled over the month, with the volume of shipments index falling to 27 from 46, and the volume of new orders index decreasing to 10 from 33.
The employment index increased slightly to 19 from 18, signaling that the pace of job creation remained broadly stable.
Supply-side bottlenecks didn't worsen but also didn't improve significantly, data from the survey showed. The backlogs of orders index decreased to nine from 29, and the supplier delivery time index dropped to 42 from 55.
"It is extremely frustrating to have a record backlog and be unable to execute due to supply-chain issues," one of the respondents of the survey said.
Inflationary pressures remained very high. The index of prices paid for raw materials rose to 83 from 81, and the index of prices received for finished products increased to 57 from 51.
"Firms continued to report issues with higher input prices, increased supply-chain disruptions, and labor shortages," Mr. Wilkerson said.
Expectations for activity in the near term remained solid in April, albeit to a lesser degree than in March. The future composite index, which gauges the outlook in the next six months, fell to 34 in April from 41 in March. Indexes for future production, shipments, new orders and employment all inched lower, the Kansas City Fed said.
Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com
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