The Kansas City Fed Manufacturing Survey revealed regional activity continued to decline in June, with the composite index at -2. This marks the 22nd consecutive month the index has been negative. Meanwhile, future expectations rose for the first time in six months, increasing from 5 in May to 9 in June.
Here is an excerpt from the latest report:
The month-over-month composite index was -2 in June, up slightly from -3 in May and -4 in April (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Declines were primarily driven by metal and transportation equipment manufacturing, while nonmetallic mineral and petroleum product manufacturing increased. The month-over-month indexes were mixed. Production, volume of shipments, and supplier delivery time all increased modestly. However, backlog of orders, new orders, and both employment indexes declined. All year-over year indexes posted negative readings, except for the price indexes. Production, new orders, employment, and backlogs all fell substantially. However, the future composite index grew from 5 to 9 in June as firms anticipate production and orders to pick back up in the next six months.
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.
