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Economy in Brief

Kansas City Fed Factory Remains Negative, but Deterioration Moderates
by Tom Moeller  May 28, 2020

• Midwest economic activity continues to decline.

• Weakness in new orders, employment and production moderated this month.

• Expectations again improve modestly.

The Federal Reserve Bank of Kansas City reported that its manufacturing business activity index increased to -19 during May after falling to a record low of -30 in April. It indicated moderation in the area's factory recession. The index of expectations in six months also improved to -2, its least negative reading in three months.

The ISM-Adjusted Index rose to 42.4 (NSA) in May from 37.6 in April. It remained well below the May 2018 high of 64.2.

All of the current conditions components -- new orders, shipments and production -- weakened less severely. The employment index remained depressed but less so. Deterioration in the employee workweek was shaved, but it remained well into negative territory where it's been since November. The export measure stabilized near its record low.

On the inflation front, the prices received index for finished products was less negative. Nevertheless, the rise to -9 still left it below a high of +27 in August 2018. The raw materials prices index remained depressed.

The index measuring expectations in six months improved m/m, but remained negative at -2. The new orders reading turned positive while expected shipments, production and employment were less negative.

Expected finished product prices deteriorated after turning positive in April. Expected raw materials prices became more positive.

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) May Apr Mar May'19 2019 2018 2017
Conditions Versus One Month Ago (% Balance)     -19 -30 -17 3 0 17 14
ISM-Adjusted Composite Index (NSA) 42.4 37.6 43.1 52.8 50.0 58.9 56.7
   New Orders Volume -25 -64 -38 2 -3 17 17
   Number of  Employees -13 -34 -32 3 -1 17 15
   Production -25 -62 -18 1 2 19 17
   Prices Received for Finished Product -9 -14 -6 15 7 22 7
Expected Conditions in Six Months -2 -6 -19 12 12 28 26
   New Orders Volume 7 -8 -35 14 17 35 35
   Number of Employees -4 -10 -19 21 15 33 39
   Production -2 -8 -36 19 19 40 40
   Prices Received for Finished Product -5 2 -10 34 26 42 27
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