Kansas City Fed Factory Index Declines Again

The Federal Reserve Bank of Kansas City reported that the rate of deterioration in manufacturing business activity lessened during June. The Composite index of 10th District factory sector activity improved to -9 from -13. The reading nevertheless remained near the low for the business cycle expansion. The new orders figure of -3 was greatly improved versus May and at the highest level this year. The shipments index, however, declined to the lowest point since December 2013. Reversing its recent deterioration, the employment showed the slowest rate of decline in three months. The composite business activity index is an average of the production, new orders, employment, supplier delivery time and materials inventory indexes. The separate prices received figure improved m/m to -2, its least negative reading this year. The index of prices paid for raw materials improved markedly to its best level since October.

Expectations for improvement in business activity were low. The future business reading rose slightly to 3 but remained near the lowest level of the expansion. Expected new orders recovered modestly but the expected shipments figure fell to the lowest point since the recession ended. The expected employment reading backpedaled to nearly its previous low. The employee workweek reading, however, recovered to its best level in three months after falling sharply through May. Expected capital expenditures also recovered to its best level since January. Expected pricing power for finished products eased m/m and remained down sharply from the highs of the economic recovery. Expected raw materials prices improved sharply to highest level in six months.

Diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The survey included 94 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming northern New Mexico. Data for the Kansas City Fed Survey can be found in Haver's SURVEYS database.