Kansas City Fed Manufacturing Activity Declined Moderately in January

The latest Kansas City Fed Manufacturing Survey composite index declined moderately in January while the future outlook expanded further. The composite index came in at -9, down from -1 in December, while the future outlook jumped to 11.

Here is an excerpt from the latest report:

Factory Activity Declined Moderately

Tenth District manufacturing activity declined moderately, and expectations for future activity expanded further (Chart 1, Tables 1 & 2). Prices paid for raw materials in January increased sharply relative to last month and this time last year. Heading forward, raw materials prices are expected to continue increasing at a faster pace than finished product prices.

The month-over-month composite index was -9 in January, down from -1 in December and -2 in November (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The contraction was driven more by durable goods manufacturing, particularly nonmetallic mineral and primary metal manufacturers. All month-over-month indexes were negative and decreased from previous readings, except the price indexes. Production and new orders fell to -17 and -19, respectively, but employment stayed mostly flat with a reading of -2. Year-over-year factory indexes decreased further in January, with the composite index decreasing from -8 to -12. Other than the prices indexes, the capital expenditures is the only index with a positive reading, but it cooled from 13 to 1. Meanwhile, the future composite index grew from 5 to 11 in January with heightened expectations for production and shipments in the next six months. [More...]

Background on Kansas City Fed Manufacturing Survey

The Kansas City Fed Manufacturing Survey is a monthly survey of ~300 manufacturing plants that provides information on current manufacturing activity and future expectations in the tenth district (Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri). The composite manufacturing index is an average of indexes on production, new orders, employment, delivery time, and raw materials inventory. This is a diffusion index, meaning negative readings indicate contraction while positive ones indicate expansion. The survey offers clues on inflationary pressures and the pace of growth in the manufacturing sector for this region of the country and the accumulated results can help trace long-term trends.