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Economy in Brief

Kansas City Federal Reserve Factory Index Strengthens; Expectations Surge
by Tom Moeller  March 23, 2017

The Federal Reserve Bank of Kansas City reported that its index of regional manufacturing sector business activity increased to 20 during March from an unrevised 14 in February. It was the highest level since March 2011. Strength in new orders, shipments and inventory volumes, as well as production led the rise in the index. Employment eased m/m but remained up sharply from the late-2015 low. The length of the employee workweek behaved similarly. The index of export orders as well as supplier delivery times fell.

The index of finished goods prices rebounded to nearly a three-year high. Raw materials prices also strengthened and matched the highest level since December 2012.

Expectations for business conditions in six months improved m/m to a record high for the series which dates back to 2001. Expected shipments reached a record level as new orders expectations strengthened. Employment expectations also reached a record level, but the expected workweek weakened. The index of expected capital expenditures surged to a record high, but expectations for export orders eased to a level still up substantially versus the 2015 low. The future inventories reading fell sharply.

Expectations for finished goods prices surged to a three-year high. Expected raw materials prices similarly strengthened.

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 and 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) Mar Feb Jan Mar '16 2016 2015 2014
Conditions Versus One Month Ago (% Balance) 20 14 9 -5 -2 -6 6
   New Orders Volume 32 26 20 -2 -1 -8 7
   Number of Employees 13 17 6 -11 -6 -10 5
   Production 37 11 20 -11 1 -5 7
   Prices Received for Finished Product 9 1 0 -9 -7 -5 5
Expected Conditions in Six Months 32 29 27 0 9 4 17
   New Orders Volume 43 36 41 2 19 11 26
   Number of Employees 43 30 31 4 8 6 18
   Production 51 42 50 7 20 11 28
   Prices Received for Finished Product 27 21 21 2 6 9 26
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