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Manufacturing activity fell slightly in the Tenth District in December, while expectations for future activity rose. The Tenth Federal Reserve District encompasses the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico. The month-over-month decline in activity was driven primarily by durable goods falling modestly, particularly wood, mineral and primary metal manufacturing, while nondurable goods activity was flat. Most month-over-month indexes were negative.

Both production and new orders fell slightly, while employment ticked up. The backlog of orders continued to decline to -22. The year-over-year composite index for factory activity ticked up slightly but was still negative. Capital expenditures, prices received and prices for raw materials all increased year-over-year while other indexes declined. The future composite index rose from 11 to��18, driven by high expectations for future production, shipments and new orders. Manufacturers also expected employment and capital expenditures to grow in the next six months.

This month, survey respondents were asked about worker productivity. More than half of firms (57%) reported that productivity has not changed in the past year, while 19% reported less productive workers and 15% reported more productivity. Firms were also asked about their reliance on immigrant workers. Nearly 70% said they were not reliant on immigrant workers, while 12% said they were slightly reliant, 13% were somewhat reliant and 6% were very reliant.

In December, Philadelphia’s regional manufacturing activity declined overall. The index for current general business activity remained negative and fell further from -5.5 to -16.4. Just 16% of firms reported increased activity this month, while nearly 33% saw decreases and nearly 47% experienced no change. The indexes for new orders and shipments turned negative and declined to -4.3 and -1.9, respectively. On the other hand, firms continued to report an increase in employment after steady job gains last month, with the employment index edging down slightly from 8.6 to 6.6. The average workweek index reversed last month’s surge, falling from 17.4 to -8.2.

Price indexes diverged, with the prices paid index increasing and the prices received index decreasing, indicating an overall rise in prices. The prices paid index moved up from 26.6 to 31.2. The prices received index remained significantly lower than the prices paid index at 7.3, exhibiting how manufacturers are eating a sizable portion of those higher costs paid.

Looking ahead, most future indicators decreased but remain elevated after two months of significant increases. The index for future general business activity fell 26 points from 56.6 to 30.7, indicating a leveling off of optimism among firms. A higher proportion of firms still expected increases in activity. Additionally, the future new orders and shipments indexes fell but were above their historical averages. While firms still expect employment to grow, the index for future employment ticked down from 34.2 to 32.1. The capital expenditures index also fell from 24.9 to 18.8. The future prices paid index declined 7 points to 56.4, while future prices received rose 10 points to 58.4.

Manufacturing activity in New York state held steady in December, with the headline general business activity index retreating 31 points to 0.2 after rising sharpy in November. In December, the new orders index decreased to 6.1, falling 21.9 points, while the shipments index fell 23.1 points to 9.4, reflecting modest gains in both orders and shipments. Unfilled orders improved slightly to -8.4 from -10.3, while inventories grew from 1.0 to 10.5. Delivery times shortened, falling 10.5 points to -7.4, while supply availability was little changed, rising to 1.1.

Employment decreased slightly in December, with the index for the number of employees falling from 0.9 to -5.8. The average employee workweek��also fell, from 6.1 to -3.9, signaling a decline in both employment and hours worked. Input and selling price increases moderated, as reflected in the prices paid index falling 6.7 points to 21.1 and the prices received index decreasing 8.2 points to 4.2.

Manufacturers felt fairly optimistic about the months ahead, but less positive than the prior month. The index for future business activity decreased to 24.6, with nearly 42% of respondents expecting conditions to improve over the next six months. Although inventories are expected to continue growing, the anticipated increase in new orders dropped from the prior month, falling 9.6 points to 21.8 in December.

Industrial production fell 0.1% in November after declining 0.4% in October. On the other hand, manufacturing output rose 0.2%, with a 3.5% gain in the motor vehicles and parts index leading the increase. Despite the end of the Boeing worker strike in early November, aerospace and miscellaneous transportation equipment output declined 2.6%, largely because of decreases in aircraft parts production. At 102.0% of its 2017 average, total industrial production in November fell 0.9% from the same month last year. Capacity utilization dropped to 76.8%, 2.9 percentage points below its long-term average from 1972 to 2023, but rose 1.2% from the same month last year.

In November, major market groups saw mixed results. Among consumer goods, the production of durables increased 1.6%, led by appliances, furniture and carpeting (3.4%) and automotive products (2.0%), while the index for nondurables decreased 0.4%, with the greatest declines in clothing (-2.0%) and paper products (-1.4%). The business equipment index improved 1.2% in November, with transit equipment up 5.1% after two months of double-digit declines.

Durable goods manufacturing increased 0.7% in November. Apart from the drop in aerospace and miscellaneous transportation equipment (-2.6%), most durable manufacturing industry groups posted gains. Nondurable goods manufacturing, on the other hand, slipped 0.3% in November, with the largest loss in apparel and leather (-2.1%).

Manufacturing capacity utilization inched up 0.1% to 76.0%, which is 2.3 percentage points below the long-term average.

Manufacturers support the policy recommendations laid out in the House of Representatives’ newly released on artificial intelligence, the 51�Թ��� said Tuesday.

What’s going on: The Bipartisan House Task Force Report on Artificial Intelligence contains AI-related recommendations for implementation by Congress.

• Drafted by the House AI Task Force—12 Republicans and 12 Democrats—the 273-page document “highlights America’s leadership in its approach to responsible AI innovation while considering guardrails that may be appropriate to safeguard the nation against current and emerging threats,” the task force’s co-chairs, Reps. Jay Obernolte (R-CA) and Ted Lieu (D-CA), wrote in a letter to House Speaker Mike Johnson (R-LA) and House Minority Leader Hakeem Jeffries (D-NY) at the beginning of the report.

The details: The task force report includes many recommendations that the 51�Թ��� supports, including the following:

• Promote innovation: “As the global leader in AI development and deployment, the United States is best positioned to responsibly enable the potential of this transformative technology for all. To maintain this leadership and enable the U.S. economy to harness the full benefits of AI, policymakers should continue to promote AI innovation.”
• Safeguard against harm: “A thoughtful, risk-based approach to AI governance can promote innovation rather than stifle it.”
• Plan for power needs: “Planning properly now for new power generation and transmission is critical for AI innovation and adoption.”
• Develop an AI-ready workforce: “Successful collaborations between educational institutions, government and industries should effectively align education and workforce development with market needs and emerging technologies.”
• Protect privacy: Congress should “[e]nsure privacy laws are generally applicable and technology-neutral.”
• Make compliance feasible: Lawmakers should ensure that AI regulatory compliance is not unduly burdensome for small businesses
• Increase cooperation: Bolster collaboration between the government, industry and academia to boost innovation and expand markets.

51�Թ��� alignment: In May, the 51�Թ��� released “,” its own report on AI’s deployment in the manufacturing sector and an accompanying list of suggested policy actions for Congress to take.

• The 51�Թ��� briefed legislators on its report in September.

Next steps: The 51�Թ��� will work closely with policymakers in Congress and the incoming administration to bolster AI innovation in manufacturing, based on shared policy goals. ����

Additionally, manufacturers will continue to call on Congress to pass federal data privacy legislation that “preempt[s] state privacy regulations [and] resolve[s] conflicting requirements in different states”—an important issue for the use of AI where the House report does not prescribe a policy solution.

The 51�Թ��� is President Trump to reconsider the Biden administration’s misguided findings regarding new liquefied natural gas export permits, following the release of a Department of Energy study claiming that increased permit numbers would have negative effects on the nation.
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What’s going on: The Department of Energy’s analysis, released Tuesday, holds “that ‘unfettered’ shipments of the fuel would make domestic prices rise … [and would] displace more renewables” ().

• However, the “report from Energy Secretary Jennifer Granholm is clearly a politically motivated document designed for an audience who believes no form of carbon-based energy is acceptable,” 51�Թ��� President and CEO Jay Timmons said. “LNG exports play a crucial role in reducing emissions by providing cleaner energy alternatives to countries reliant on higher emission sources.”�� ��

What the ban’s done: The result of the Biden administration’s —issued in January—on the issuance of new U.S. LNG export permits has been “chilled energy investment, costing the country manufacturing jobs and holding us back from achieving energy dominance on the world stage,” Timmons continued.

• “The DOE’s report claims to be concerned about security, but the actions of this administration on LNG only serve to incentivize Europe to purchase natural gas from Russia.”����

A popular, key energy source: U.S. LNG is far cleaner than Russian LNG (). Furthermore, an October by the 51�Թ��� and PwC found that U.S. LNG is a significant and crucial contributor to gross domestic product, as well as an important source of jobs and federal, state and local taxes.

• What’s more, Americans want to keep exporting it. In a March 51�Թ��� of 1,000 registered voters, more than 87% said they believe the U.S. should continue to export LNG.������

The bottom line: “The data is clear: LNG exports are a driving force for economic growth and job creation in the United States,” Timmons concluded. “Halting LNG export licenses as suggested would threaten nearly a million jobs and undermine our nation’s economic stability. The 51�Թ��� asks President Trump to end this political war on the energy manufacturers that power our economy, fuel job growth and help ensure America’s national security.”��

In its current form, the Environmental Protection Agency’s recent proposal to add specific per- and polyfluoroalkyl substances and PFAS categories to a database of toxic chemicals would place an unnecessary hardship on manufacturers, the 51�Թ��� the agency recently.
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What’s going on: In October, the EPA published draft rules that would add 16 individual PFAS and 15 PFAS categories representing more than 100 individual PFAS to its Toxic Release Inventory, a list of potentially hazardous chemical release and waste management activities taking place in the U.S.

• Companies producing or manufacturing products with chemistries added to the TRI are required to complete and submit inventory forms each year for the chemicals they make and use over established limits.
• “The 51�Թ��� believes this proposed rule will create unduly burdensome compliance requirements and increase costs for manufacturers and consumers as written,”��51�Թ��� Vice President of Domestic Policy Chris Phalen said this month.

What should happen: The EPA should “adopt the following approaches to the proposed rulemaking”:

• Stay the proposal to give the public more time to comment on it.
• Revise the proposed PFAS and PFAS category additions to reflect “a meaningful baseline of scientific evidence” and ensure that “the scientific evidence justifying the listing[s] [is] supported by peer review and public comment.”
• List individually every PFAS added to the TRI and make each one identifiable.
• Narrow the group of PFAS listed as “chemicals of special concern” to reflect the scope of authority granted to the EPA by the fiscal year 2020 National Defense Authorization Act.

Why it’s important: “While the EPA estimates this proposed rule would result in up to 1,110 TRI reporting forms annually at an estimated cost of up to $6.6 million for its first year and up to $3.1 million for subsequent years, we anticipate the compliance costs to manufacturers will be significantly higher,” Phalen continued.

• If finalized as written, the rule will force manufacturers to hire additional workers and consultants, train employees on proper reporting processes, spend huge sums of money on testing and verifying results and much more.
• The result: “a costly drain on [manufacturers’] resources … [that] will lead to a rise in operational and production costs far above the EPA’s cost estimates for the proposed rule.”

U.S. import prices advanced 0.1% in November, the same as the previous month and led by higher fuel prices. Over the past year, import prices rose 1.3%, the largest year-over-year increase since July 2024. U.S. export prices were unchanged, following a 1.0% increase in October. Higher nonagricultural prices offset lower agricultural prices. Over the past year, export prices rose 0.8%.

Fuel import prices increased 1.0% in November, after declining 0.8% in October. These increases are attributed to higher prices for natural gas and petroleum in November. Nevertheless, prices for import fuel declined 8.6% over the past year. Import prices for petroleum increased 0.4% in November, after declining 11.6% from July to October. While import prices for natural gas declined 34.5% over the past year, prices increased 47.4% in November and 32.7% the previous month.

Nonfuel import prices were unchanged in November, following a 0.2% increase the two previous months. Nonfuel import prices have not declined on a monthly basis since May 2024, when they fell just 0.2%. Higher prices for foods, feeds and beverages and consumer goods offset lower prices for nonfuel industrial supplies and materials, capital goods and automotive vehicles in November. The price index for nonfuel imports increased 2.3% over the past year.

Following increases of 1.9% in October and 0.8% in September, agricultural export prices declined 0.4% in November. Over the past 12 months, agricultural export prices dropped 2.5%. On the other hand, nonagricultural export prices increased 0.1% in November, with lower prices for consumer goods offsetting higher prices for capital goods and nonagricultural foods. Prices for nonagricultural industrial supplies and materials and automotive vehicles were unchanged. Over the past year, nonagricultural export prices rose 1.2%, the largest annual increase since July 2024.

The NFIB Small Business Optimism Index rose eight points in November to 101.7, the highest rating since June 2021 and finally rising above the 50-year average of 98 after 34 consecutive months below the average. Of the 10 components included in the index, nine increased and one was unchanged. After October’s record high of 110, the Uncertainty Index declined 12 points to 98, as expected following the election.

Despite increased optimism, inflation is still the top concern for many small business owners, with 20% identifying higher input and labor costs as their primary issue, surpassing the issue of labor quality by one point. In November, 36% of small business owners reported jobs they could not fill, up 1% from October.

A net 28% of small business owners planned price hikes in November, up 2% from the month prior. A net 32% of small business owners reported raising compensation, up one point from October. Continuing the trend from October,��a net 5% of owners reported paying a higher rate on their most recent loan, the lowest reading since January 2022. Profitability remained under pressure, with a net negative 26%, but was the highest (least negative) reading this year. Of those reporting lower profits, 32% claimed weaker sales.

The outlook for general business conditions had a positive reading for the first time since November 2020, jumping an incredible 41 points. While small business owners are still facing unprecedented economic adversity, owners remain hopeful for an improved political climate and as they head into the holiday season.

The Producer Price Index for final demand (also known as wholesale prices) increased 0.4% in November, after rising 0.3% in October. Over the past year, the final demand index rose 3.0% on an unadjusted basis, which is the largest increase since the year-over-year increase in February 2023 of 4.7%. Prices for final demand excluding foods, energy and trade services inched up 0.1%, after rising 0.3% in October.

In November, prices for final demand services increased 0.2%, the fourth consecutive increase, while prices for final demand goods rose just 0.7%. Much of the increase in the index can be attributed to prices for final demand of foods, which increased 3.1%. The index for final demand goods, excluding foods and energy, increased just 0.2%. More than one-third of the increase in prices for final demand services is due to margins for machinery and vehicle wholesaling, increasing 1.8%.

Processed goods for intermediate demand were unchanged. On the other hand, over the 12 months ending in November, prices for processed goods for intermediate demand fell 0.5%. Within processed goods for intermediate demand, the index for particleboard and fiberboard jumped 11.4%. Overall, in November, a 0.1% increase in prices for processed materials less foods and energy and a 0.9% increase in processed foods and feeds offset a 1.2% decrease in prices for processed energy goods.

Meanwhile, prices for unprocessed goods for intermediate demand moved up 0.6% in November, after increasing 2.4% in October. The increase was driven by a 2.9% rise in unprocessed foodstuffs and feedstuffs. Meanwhile, nonfood materials less energy prices edged up just 0.4%, and unprocessed energy materials decreased 2.0%. Over the 12 months ending in November, prices for unprocessed goods for intermediate demand fell 1.9%.