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Economy in Brief

Kansas City Federal Reserve Factory Index Weakens
by Tom Moeller  November 17, 2017

The Federal Reserve Bank of Kansas City reported that its index of regional manufacturing sector business activity declined to 16 in November following an unrevised October increase to 23. The figure was the lowest reading in three months, but left the positive, two-year trend in place. The ISM-Adjusted index fell to 58.1 (NSA), also its lowest level in three months. During the last ten years, there has been a 57% correlation between this index and the q/q change in real GDP.

Movement amongst the index components was negative. Production, new orders & shipments each fell following earlier increases. The inventory measure also fell. The supplier delivery index collapsed, showing the quickest delivery speeds since April. Export orders also fell to a four-month low; and unfilled orders eased.

Employment slipped, but remained in its recent up-trend. Thirty percent of respondents reported increased hiring while 12% reported a decline in job levels. The employee workweek measure also fell moderately.

The index of finished goods prices slipped following last month's stability. It remained up significantly since the January 2015 low. The raw materials prices index also eased m/m, but remained significantly improved versus the 2015 low.

The overall expectations index posted a moderate decline following its October jump. Expected new & export orders, shipments, production and the employee workweek each fell. Employment held steady and the delivery time measure rose. Capital spending slipped, but remained in the recent up-trend.

Expectations for finished goods prices moved to an expansion high, up sharply since the September 2015 low. Expected raw material prices also jumped to the highest level since March.

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) Nov Oct Sep Nov '16 2016 2015 2014
Conditions Versus One Month Ago (% Balance) 16 23 17 0 -2 -6 6
ISM-Adjusted Composite Index (NSA) 58.1 62.2 59.2 48.1 48.5 46.8 52.7
   New Orders Volume 22 27 10 5 -1 -8 7
   Number of Employees 16 21 18 -1 -6 -10 5
   Production 15 20 22 5 1 -5 7
   Prices Received for Finished Product 12 13 13 -4 -7 -5 5
Expected Conditions in Six Months  27 32 26 12 9 4 17
   New Orders Volume 31 45 27 25 19 11 26
   Number of Employees 35 35 26 6 8 6 18
   Production 40 47 38 23 20 11 28
   Prices Received for Finished Product 37 32 29 9 6 9 26
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