The Kansas City Fed Manufacturing Survey revealed regional activity contracted slightly in May, with the composite index at -3. This marks the 21st consecutive month the index has been negative. Future expectations stayed positive, though they eased from 6 in April to 5 in May.
Here is an excerpt from the latest report:
The month-over-month composite index was -3 in May, up slightly from -4 in April and down from -2 in March (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 declined—driven by food manufacturing—while durable manufacturing was mostly flat, with increases in metals and furniture manufacturing and decreases in electronic and transportation equipment. Production, volume of shipments, and new orders all fell moderately this month. Backlogs of orders declined substantially, while employment increased modestly and inventories were mostly flat. Most year-over-year indexes were negative, except for the prices indexes, capital expenditures, and raw materials inventory. Production continued to decrease along with the number of employees and average employee workweek. The future composite index ticked down from 6 to 5 in May as expectations for future production, shipments, and orders all stayed somewhat positive.
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.
