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Economy in Brief

Kansas City Federal Reserve Factory Sector Index Slackens
by Tom Moeller  October 25, 2018

The Federal Reserve Bank of Kansas City reported that its index of regional manufacturing sector business activity declined to 8 in October, the lowest level since December 2016. It remained down from the May high of 29.

The ISM-Adjusted index improved slightly to 55.7 (NSA) this month from 55.4 but 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. Declining sharply were the new orders, production and supplier delivery times indexes, the latter indicating the quickest product delivery speeds since November 2017. The export orders series improved moderately as did the order backlog series, but both remained depressed versus earlier levels.

The employment reading rose slightly following marked weakness during Q3. A slightly higher 28 percent (NSA) of respondents reported increased hiring while a lessened 16 percent reported a decline in job levels. The employee workweek index stabilized after it tumbled in Q3.

The index of finished goods prices weakened to the lowest level since December. A lessened twenty-six percent of respondents paid higher prices, while a steady four percent paid less. The raw materials prices index fell to the lowest level since December.

The overall expectations index declined to 21, the lowest level in 12 months and down sharply from its February high of 38. Expected employment declined sharply as did the expected supplier delivery times index. Expected production and export orders fell m/m. The expected capital expenditure figure plummeted to the lowest level since December 2016.

The expected finished goods price index fell m/m and remained down versus the high six months ago. The expected raw materials price figure has weakened considerably since May 2016.

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) Oct Sep Aug Oct '17 2017 2016 2015
Conditions Versus One Month Ago (% Balance)     8 13 14 22 14 -2 -5
ISM-Adjusted Composite Index (NSA) 55.7 55.4 57.0 62.2 56.7 48.5 46.8
   New Orders Volume 7 15 9 24 17 -1 -7
   Number of  Employees 8 1 14 19 15 -6 -10
   Production 5 10 10 18 17 1 -5
   Prices Received for Finished Product 19 24 27 11 7 -7 -5
Expected Conditions in Six Months 21 27 29 30 26 9 4
   New Orders Volume 41 35 36 47 35 19 11
   Number of Employees 15 29 33 33 31 8 6
   Production 37 38 44 45 41 20 12
   Prices Received for Finished Product 38 44 28 31 27 7 9
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