The latest Kansas City Fed Manufacturing Survey composite index did not decline as much in August following a sharper decline last month. The composite index came in at -3, up from -13 in July. Meanwhile, the future outlook increased to 8, its highest level since January.
Here is an excerpt from the latest report:
Factory Activity Declined Less
Tenth District manufacturing activity declined less this month than in July, while expectations for future activity remained positive. Finished product prices increased somewhat this month after staying flat in July, but raw materials prices continue to grow at a faster pace. (Chart 1, Tables 1 & 2)
The month-over-month composite index was -3 in August, up from -13 in July and -8 in June (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Nondurable manufacturing was essentially flat, while durable goods manufacturing fell somewhat, driven by transportation equipment, fabricated metal, and machinery. The month-over-month indexes were mixed, but all increased from last month’s readings. Production rebounded from -12 to 6 while the volume of new orders stayed negative at -12 and backlogs posted a reading of -19. The two employment indexes also declined further. The year-over-year composite index for factory activity ticked down from -13 to -14 as production, shipments, and new orders all continue to fall considerably. Employment levels decreased moderately while capital expenditures stayed steady with a reading of 1. The future composite index increased from 5 to 8, as production and employment are expected to increase substantially.
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.