Kansas City Fed Manufacturing Index Improves Again in March

• Growth continues at a record level.

• Component movement is mixed.

• Expectations for six months ahead improve.

The Federal Reserve Bank of Kansas City reported that its manufacturing sector business activity index rose to a record 26 in March from 24 in February. The headline figure compares to -17 one year ago. The series dates back to July 2001.

The ISM-Adjusted Index (NSA) rose to 65.4 in March from 60.6 in February. It too was a record, remaining well above the level of 50 which separates expansion from contraction.

Movement amongst the individual series was mixed. The supplier delivery time index held steady after surging to a record 40 in February, indicating sharply slower product delivery speeds. The new orders index also surged to a near-record 37 from 16 in February. The shipments index recaptured most of its February decline. The order backlog measure surged to a new high. To the downside, the employment series eased to 17 from 21 in February which was the highest level since July 2018. The production series declined to 23 from 26, also the highest level since July 2018.

On the inflation front, the prices received index for finished products strengthened to a near-record 31. It compared to the deflationary readings registered earlier last year. The raw materials index eased to 66 from 68. It remained up from -16 in April of 2020.

The expectations-in-six months composite reading edged higher to 35 in March, up sharply from -19 in March of last year. Expected new orders and shipments fell but employment and production improved.

Expectations for prices received rose to a near-record 48. Expectations for raw materials prices also surged to 72 this month, the highest level since March 2011.

The figures date back to July 2001. 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.