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Economy in Brief

Kansas City Fed's Factory Index Slips in August
by Tom Moeller  August 26, 2021

• Overall growth remains slightly below April's record.

• New orders strengthen but production weakens.

• Prices continue to firm.

• Expected conditions improve.

The Federal Reserve Bank of Kansas City reported that its manufacturing sector business activity index eased to 29 in August from 30 in July. It posted a record high of 31 in April. The series dates back to July 2001.

The ISM-Adjusted Index (NSA) fell to 63.0 in August from 64.3 in July. The series record for this measure was 66.7 in April and the latest stands well above the break-even level of 50 which separates expansion from contraction.

The new orders index increased to a near-record 34 this month after rising to 26 in July. The shipments index eased, however, to 25 from July's high of 37. The order backlog measure fell sharply to 30 from the record 53 in July. Supplier delivery times rose to 41 and matched the record, indicating very slow delivery speeds. To the downside was the production index which fell sharply to 22 from the high of 41 in July.

The employment measure edged up to 28 in August from 27 in July, off slightly from the record reading of 29 in April. Almost 60% of firms reported a decease in the number of job applicants. The workweek index halved to 15, its lowest level in six months.

On the inflation front, the prices received index for finished products strengthened to a new record 61 in August from 52 in July. The raw materials index edged up slightly to 80. This compares with a recent low of -16 in April 2020.

The expectations reading improved this month to 36 and made up most of July's decline to 33. Expectations for supplier deliveries, capital expenditures and materials inventories rose while expected new orders, employment, prices, shipments and production all fell.

The latest survey was conducted from August 18-23, 2021 and included 94 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri.

The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Data for the Kansas City Fed Survey can be found in Haver's SURVEYS database.

Kansas City Federal Reserve Manufacturing Survey (SA) Aug Jul Jun Aug'20 2020 2019 2018
Conditions Versus One Month Ago (% Balance)     29 30 27 14 0 0 17
ISM-Adjusted Composite Index (NSA) 63.0 64.3 64.2 55.0 50.1 50.0 58.9
   New Orders Volume 34 26 22 26 1 -3 17
   Number of  Employees 28 27 26 9 -4 -1 17
   Production 22 41 30 23 0 2 19
   Prices Received for Finished Product 61 52 48 4 2 7 22
Expected Conditions in Six Months 36 33 37 19 10 12 28
   New Orders Volume 31 40 45 21 12 17 35
   Number of Employees 47 48 45 26 11 15 33
   Production 46 48 44 20 14 19 40
   Prices Received for Finished Product 55 64 56 16 16 26 42
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