By Xavier Fontdegloria

Manufacturing activity in central U.S. was broadly stable in March for the second month in a row, suggesting that the factory sector continued to face headwinds amid weakening demand.

The Federal Reserve Bank of Kansas City said Thursday that the Tenth District manufacturing survey's composite index was unchanged at zero in March, signaling that activity stalled over the month.

Economists polled by The Wall Street Journal expected the index to decline to minus 2.

The survey gauges manufacturing activity in the western third of Missouri, all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming, and the northern half of New Mexico.

Nondurable goods factories reported decreased activity, especially printing, plastics and chemical manufacturing, while activity among food manufacturers increased, the Kansas City Fed said.

The production index increased to 3 in March from minus 9 a month earlier, signaling a marginal increase in output.

Demand for goods in the region continued to be subdued, the data showed. The new orders index declined to minus 13 from minus 6, while the shipments index rose to 6 from minus 13.

Despite weakening demand conditions, the employment index edged up to 18 from 11, in a sign that firms continued to expand their workforce.

Prices pressures persisted, albeit at a much lower level than a year ago. The index of prices paid for raw materials increased to 30 from 26, while the index of prices received for finished products fell to 13 from 17.

"Given current price pressures, around half of firms reported lower profit margins from the beginning of the year and changing prices more frequently than last year," said Chad Wilkerson, senior vice president and economist at the Federal Reserve Bank of Kansas City.

Firms were little optimistic about the short-term outlook. The future composite index--which gauges the outlook in the next six months--rose to 3 in March from 1 in February, with firms expecting improvements in production, new orders and employment.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

March 23, 2023 11:39 ET (15:39 GMT)