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Economy in Brief

Kansas City Fed Factory Index Moves Toward Breakeven; Expectations Rise
by Tom Moeller  January 24, 2020

The Federal Reserve Bank of Kansas City reported that its index of regional manufacturing business activity improved to -1 in January following December's sharp deterioration to -5. These negative readings still indicate declining overall manufacturing activity. The index of expectations in six months rose to 14 and recovered most of its yearend decline.

The ISM-Adjusted Index rebounded to 48.3 (NSA) in January and also made up most of last month's decline. Nevertheless, this is the seventh consecutive month that the index was below the break-even level of 50.

The current condition components of the survey exhibited mixed performance with the new orders and employment measures both increasing. The shipments and production indexes, however, deteriorated. The export measure improved m/m but remained well below its year-ago level. The employee workweek measure held fairly steady but was negative for the third straight month.

On the inflation front, prices received for finished products continued to fall moderately compared to strength early last year. Raw materials prices increased and were at the highest level since December 2018.

The index measuring expectations in six months rose with a gain in the shipments series. It recouped its December decline. The expected employment measure also strengthened as did inventories & production. Expected new orders overall weakened significantly along with expected export orders.

Expected prices received rose but remained down sharply y/y. Expected raw materials prices remained weak.

The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The December survey included 93 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico and was conducted in the period from December 11-16, 2019. 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 '19 2019 2018 2017
Conditions Versus One Month Ago (% Balance)     -1 -5 -2 5 0 17 14
ISM-Adjusted Composite Index (NSA) 48.3 43.4 49.4 51.9 50.0 58.9 56.7
   New Orders Volume -2 -13 -4 1 -3 17 17
   Number of  Employees 4 -7 -7 8 -1 17 15
   Production -4 -3 -2 2 2 19 17
   Prices Received for Finished Product -3 -2 3 21 7 22 7
Expected Conditions in Six Months 14 9 16 18 12 28 26
   New Orders Volume 9 16 28 24 17 35 35
   Number of Employees 20 9 7 24 15 33 31
   Production 23 14 27 29 19 40 40
   Prices Received for Finished Product 20 13 17 40 26 42 27
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