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Economy in Brief

Kansas City Fed Factory Index Collapses
by Tom Moeller  March 26, 2020

In lockstep with other regional Fed indexes recently released, the Federal Reserve Bank of Kansas City reported that its reading of manufacturing business activity plunged to -17 in March following February's improvement to 5. It was the lowest reading since March 2009, indicating major recession in the area's factory sector activity. The index of expectations in six months fell to -19, also the weakest reading in eleven years.

The ISM-Adjusted Index fell to 43.1 (NSA) in March. It was the lowest index level since December 2015 and down from the May 2018 high of 64.2.

The current condition components all weakened this month with new orders, shipments and production each falling sharply. The employment index fell further into negative territory, nearly touching its March 2009 low. The export measure also reached a record low. The employee workweek measure fell deeper into negative territory where it's been for five months.

On the inflation front, prices received for finished products turned negative. The fall to -6 compares to +27 in August 2018. The raw materials prices index hit a four-year low.

The index measuring expectations in six months similarly fell significantly, reflecting sharply lower new orders, shipments and production. The expected employment measure also collapsed.

Expected finished product prices fell sharply along with expected raw materials prices.

The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The survey includes 93 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico and was conducted mid-month. 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'19 2019 2018 2017
Conditions Versus One Month Ago (% Balance)     -17 5 -1 9 0 17 14
ISM-Adjusted Composite Index (NSA) 43.1 52.7 48.3 56.4 50.0 58.9 56.7
   New Orders Volume -38 8 -2 3 -3 17 17
   Number of  Employees -32 -4 4 12 -1 17 15
   Production -18 8 -4 13 2 19 17
   Prices Received for Finished Product -6 9 -3 8 7 22 7
Expected Conditions in Six Months -19 16 14 20 12 28 26
   New Orders Volume -35 21 9 26 17 35 35
   Number of Employees -19 20 20 29 15 33 31
   Production -36 21 23 26 19 40 40
   Prices Received for Finished Product -10 28 20 36 26 42 27
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