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Economy in Brief

Kansas City Fed Manufacturing Index Continues to Improve in January
by Tom Moeller  January 28, 2021

• Growth continues at quickest rate since November 2018.

• Component improvement is broad-based.

• Expectations for six months ahead increases.

The Federal Reserve Bank of Kansas City reported that its manufacturing sector business activity index rose to 17 in January from 14 in December. The headline figure remained well above the all-time low of -30 posted in April and equaled the highest level since November 2018.

The ISM-Adjusted Index (NSA) rose to 58.1 in January from 53.0 in December and remained well above the critical level of 50 that separates expansion from contraction. It also remained well above the low of 37.6 in April of last year.

Improvement in the current conditions measures was broad-based. The new orders measure edged higher to 25 from 24, after moving sideways since August. The employment measure also rose along with shipments. The production measure rose to the highest level in three months.

On the inflation front, the prices received index for finished products strengthened to 19, the highest level in two years. It compares to the deflationary readings registered earlier this year. The raw materials index surged to 65, up from -16 in April of 2020 and the highest reading since April 2011.

The expectations-in-six months composite reading rose to 24 in January, the highest level since September 2018. It remained up sharply from -19 in March of last year. Expected new orders, shipments and production each improved sharply. The employment measure rose moderately both m/m and y/y.

Expectations for prices received rose to 38 in January, its highest level in two years. Expectations for raw materials prices also surged to 61 this month, the highest level since July 2018.

The composite index is an average of the production, new orders, employment, supplier delivery time and raw materials inventory indexes. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The November survey was conducted during the six-day period from November 10-16, 2020 and included 109 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri. 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'20 2020 2019 2018
Conditions Versus One Month Ago (% Balance)     17 14 11 -1 0 0 17
ISM-Adjusted Composite Index (NSA) 58.1 53.0 53.9 48.3 50.1 50.0 58.9
   New Orders Volume 25 24 19 -2 1 -3 17
   Number of  Employees 13 7 1 4 -4 -1 17
   Production 22 12 20 -4 0 2 19
   Prices Received for Finished Product 19 9 7 -3 2 7 22
Expected Conditions in Six Months 24 17 20 14 10 12 28
   New Orders Volume 31 21 24 9 12 17 35
   Number of Employees 25 22 17 20 11 15 33
   Production 46 20 31 23 14 19 40
   Prices Received for Finished Product 38 25 30 20 16 26 42
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