03:49 PM EDT, 07/25/2024 (MT Newswires) -- Manufacturing activity in the US Midwest region posted a surprise decline into deeper contraction territory this month as orders plunged further, the Federal Reserve Bank of Kansas City reported on Thursday.

The composite manufacturing index fell to minus 13 in July from minus 8 in June. The consensus was for a minus 5 print in a survey compiled by Bloomberg. The decline in activity was driven by durable manufacturing, including transportation equipment, fabricated metal and machinery, the report showed.

"Our regional factory index was at its lowest level in four years in July," Kansas City Fed Senior Vice President Chad Wilkerson said. "The volume of shipments and new orders fell substantially while production and employment levels decreased at a moderate pace."

Shipments tumbled to minus 18 from minus 1 month to month, while the gauge for new orders slid to minus 21 from minus 13. The production and employment indexes both dipped one point to minus 12, the Kansas City Fed said.

The index charting raw material prices climbed to 17 this month from 9 in June while selling prices' cooled to zero from 3 month to month. "Price growth for raw materials increased this month while cooling slightly for finished products, further constraining profits margins," the regional Fed branch wrote in its report.

Six months out, the seasonally adjusted composite index lowered two points to 5 this month and the future production index dipped to 13 from 18. Shipments advanced two points to 14 while orders held steady at 8, the report showed.

"A majority of firms expect to maintain or increase current levels in the next six months," Wilkerson said.

Firms indicated that they expect input prices to ease slightly six months from now and see selling prices moving marginally higher. The forward-looking employment metric dipped four points to 13, according to the Fed branch's data.