03:53 PM EDT, 05/23/2024 (MT Newswires) -- Manufacturing activity in the US Midwest region improved into shallower contraction territory in May as shipments swung positive while orders declined, the Federal Reserve Bank of Kansas City reported on Thursday.

The composite manufacturing index advanced to minus 2 this month from minus 8 in April. The consensus was for a minus 7 print in a survey compiled by Bloomberg.

"Regional factory activity was basically flat in May," Kansas City Fed Senior Vice President Chad Wilkerson said. "Employment levels increased somewhat and many firms expect to increase wages at a similar rate to the past in the year ahead."

Volume of shipments rebounded to 8 from minus 11 month over month while the production index improved to minus 1 from minus 13. Volume of new orders retracted to minus 13 from minus 6, the Kansas City Fed said.

The employee index swung positive at 9 compared with a minus 2 reading the month prior. Raw material prices increased to 19 in May from 18 in April while selling prices rose to 7 from zero. "Raw materials prices continue to grow at a faster pace than finished product prices," the regional Fed wrote in the report.

Overall, the pace of decline in activity slowed in paper, chemical, and fabricated metal manufacturing. Activity expanded in printing, nonmetallic mineral and furniture manufacturing in the Midwest region.

Six months out, the seasonally adjusted composite index advanced to 6 this month from 2 in April. The future production index rallied to 21 from 16, while the shipments component climbed to 15 from 5. Future new orders jumped to 18 from 1, according to the Fed branch's data.

Firms continue to expect raw material price increases to outpace selling prices. The index for input price expectations rose 10 points to 40 while the finished product component was flat from April to May at 26.