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Economy in Brief

Kansas City Fed Factory Index Turns Positive in June; Component Improvement Is Broad-based
by Tom Moeller  June 25, 2020

• Midwest economic activity increases.

• New orders and production lead gains this month.

• Expectations rise as well.

The Federal Reserve Bank of Kansas City reported that its manufacturing business activity index increased to 1 during June after three consecutive negative readings. It indicated a roughly stable level of activity following a sharp factory recession. The index of expectations in six months also turned positive with a reading of 9 following three consecutive months of declining activity.

The ISM-Adjusted Index rose to 52.4 (NSA) in June from 42.4 in May. It was the first index level above break-even level since February, but still below the May 2018 high of 64.2.

All of the current conditions components, including new orders, shipments and production strengthened this month. The employment index was less depressed. The employee workweek reading of zero followed seven consecutive figures below zero. The export measure remained negative, but was improved from even deeper readings below zero in the prior three months.

On the inflation front, the prices received index for finished products turned positive for only the second month in the last seven. At 7, it still was below a high of 27 in August 2018. The raw materials prices index of 1 followed three negative figures. It was down, however, from its level of 50 in July 2018.

The index measuring expectations in six months turned positive as shipments, new orders, employment and production each moved above zero.

Expected finished product prices remained in positive territory in June. Expected raw materials prices also were firm.

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) Jun May Apr Jun'19 2019 2018 2017
Conditions Versus One Month Ago (% Balance)     1 -19 -30 0 0 17 14
ISM-Adjusted Composite Index (NSA) 52.4 42.4 37.6 51.5 50.0 58.9 56.7
   New Orders Volume 7 -25 -64 3 -3 17 17
   Number of  Employees -6 -13 -34 3 -1 17 15
   Production 2 -25 -62 -2 2 19 17
   Prices Received for Finished Product 7 -9 -14 5 7 22 7
Expected Conditions in Six Months 9 -2 -6 10 12 28 26
   New Orders Volume 16 7 -8 16 17 35 35
   Number of Employees 8 -4 -10 12 15 33 39
   Production 14 -2 -8 20 19 40 40
   Prices Received for Finished Product 13 -5 2 30 26 42 27
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