Kansas City Fed's Factory Sector Activity Index Continues to Weaken

The Federal Reserve Bank of Kansas City reported that manufacturing sector business activity slackened during August. The Composite index of 10th District factory sector activity fell to -9 and reversed July's improvement. The figures compare to May's low of -13. The Fed indicated that the new orders reading eased to its lowest level in three months and shipments reversed a July improvement. The employment figure improved, however, and reversed most of its July deterioration. It still suggested meaningful job loss. The rate of materials inventory decumulation picked up steam. Separately, production fell at nearly the swiftest rate since the recession but the decline in new export orders eased. Prices paid for finished product fell at nearly the fastest rate since 2009 and raw materials pricing slackened as well.

The composite index for business activity expected in six months neared its recovery low of zero. Expectations for shipments and new orders weakened substantially along with employment prospects. The expected rate of materials inventory decumulation increased, to be accomplished by strengthened production cuts. Capital spending plans were weakened as were export expectations. Finished product price expectations eased to near the expansion low along with raw materials price expectations.

The 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.