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Economy in Brief

Kansas City Fed's Factory Sector Index Deteriorates; Prices Turn Lower
by Tom Moeller  January 22, 2015

The Federal Reserve Bank of Kansas City reported that its Composite index of 10th District factory sector activity fell back to 3 this month, the lowest level since August. A negative new orders figure accounted for much of the deterioration as it declined to the lowest level since February 2013. The employment reading also fell to neutral, its weakest point since August. The composite index is an average of the production, new orders, employment, supplier delivery time and materials inventory indexes. The prices paid index fell m/m to -3, the lowest level since July 2010. The index of prices paid for raw materials ticked up a point but remained near the lowest level of the economic expansion.

The expectations reading held steady at the lowest level in three months, but it still suggested future improvement in business conditions. Expected new orders remained in a range suggesting moderate improvement while the expected shipments figure improved to its highest point since April. While still suggesting positive growth, expected employment returned to its lowest point in three months. The employee workweek rose and remained in the range of the last year. Expected capital expenditures fell back to the lowest level since March. Expected pricing power for finished products weakened slightly but expected raw materials prices fell to nearly the lowest level of the economic recovery.

The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The survey included 94 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming northern New Mexico. Data for the Kansas City Fed Survey can be found in Haver's SURVEYS database.

Kansas City Federal Reserve Manufacturing Survey (SA) Jan Dec Nov Jan '14 2014 2013 2012
Conditions Versus One Month Ago (% Balance) 3 8 6 5 6 0 4
   New Orders Volume -8 14 0 6 8 1 0
   Number of Employees 0 8 8 10 5 -2 5
   Prices Received for Finished Product -3 1 5 7 5 4 5
Expected Conditions in Six Months 19 19 21 25 17 10 12
   New Orders Volume 24 23 24 35 26 18 21
   Number of Employees 24 30 28 29 18 9 13
   Prices Received for Finished Product 27 28 24 27 26 24 24
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