Kansas City Fed Manufacturing Activity Declined Further in March

The latest Kansas City Fed Manufacturing Survey composite index declined further in March while future expectations were steady. The composite index came in at -7, down from -4 in February, while the future outlook inched down to 1.

Here is an excerpt from the latest report:

Factory Activity Declined Further

Tenth District manufacturing activity declined further in March, and expectations for future activity were again steady. Prices continued to grow at a similar rate to previous months, with a continued spread between raw materials and finished goods growth. (Chart 1, Tables 1 & 2)

The month-over-month composite index was -7 in March, down from -4 in February and up from -9 in January (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Activity for declined modestly for both durable and nondurable goods, with primary metal, electrical equipment, and paper manufacturing driving the decreases. Production and volume of shipments decreased somewhat, while both new orders and backlogs fell sharply. Employment levels continued to climb, but the average employee workweek declined from 2 to -11. The year over-year index for factory activity ticked up to -4 from -8. The pace of decline slowed in the supplier delivery time and raw materials inventory indexes, while volume of shipments and number of employees grew. The production and capital expenditures indexes both had similar readings to last month. The future composite index ticked down to 1 from 2 in March, with the production index boosting the composite at a reading of 18 and the raw materials inventory index dragging at -16. [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.