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Economy in Brief

Kansas City Federal Reserve Factory Index Weakens Further
by Tom Moeller  August 23, 2018

The Federal Reserve Bank of Kansas City reported that its index of regional manufacturing sector business activity declined to 14 in August, the lowest level since December. It remained down from the high of 29 three months ago.

The ISM-Adjusted index fell to 57.0 (NSA) this month from 60.7 in July and remained down from its April high of 64.2. 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 mostly negative. The new orders, shipments, production and supplier delivery times fell, indicating the quickest product delivery speeds since April. The export orders series turned negative. Order backlogs ticked higher, but remained low.

The employment reading fell sharply and reversed a year's worth of strength. A lessened twenty-six percent (NSA) of respondents reported increased hiring while a higher 14 percent reported a decline in job levels. The employee workweek index declined sharply to the lowest level since January.

The index of finished goods prices held steady, remaining near its 2008 high. Twenty-nine percent of respondents paid higher prices, while four percent paid less. The raw materials prices index fell to the lowest level since January.

The overall expectations index declined m/m but generally has moved sideways all year. Expected orders, production and employment declined along with most other series. Expected export orders improved m/m, but remained down sharply from a January high.

Expected finished goods prices sank m/m but remained up sharply from 2016. The expected raw materials price figure also cratered m/m to its lowest level in a year.

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) Aug Jul Jun Aug '17 2017 2016 2015
Conditions Versus One Month Ago (% Balance)     14 23 28 16 14 -2 -5
ISM-Adjusted Composite Index (NSA) 57.0 60.7 64.0 57.9 56.7 48.5 46.8
   New Orders Volume 9 21 27 24 17 -1 -7
   Number of  Employees 14 26 24 14 15 -6 -10
   Production 10 22 38 22 17 1 -5
   Prices Received for Finished Product 27 27 22 8 7 -7 -5
Expected Conditions in Six Months 29 34 36 24 26 9 4
   New Orders Volume 36 37 42 39 35 19 11
   Number of Employees 33 42 37 27 31 8 6
   Production 44 49 53 39 41 20 12
   Prices Received for Finished Product 28 43 40 30 27 7 9
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