Haver Analytics
Haver Analytics
| Feb 06 2024

Kansas City Fed Manufacturing Activity Index Declines Sharply in January

  • Index at lowest level in six months.
  • All components remain negative.
  • Expectations for six months ahead improve sharply.

The Federal Reserve Bank of Kansas City reported that its index of manufacturing sector activity declined to -9 in January from -1 in December, indicating that a recent retreat in activity picked up speed. The index has been at zero or below since October 2022. Haver Analytics calculates an index based on the Kansas City results which is comparable to the ISM series. This index eased to 45.0 (NSA) from 45.4 in December. It was the lowest level since September and compared to 49.7 in January 2023.

Each component series deteriorated last month and remained in negative territory. New orders fell to -19 from -9 in December. It equaled the lowest reading since May 2020. Shipments declined to -20 from -5 and also is the weakest reading also since May 2020. Employment fell to -2 from +7 In December. It was the third negative reading in the last four months, while the average workweek index fell to -6 from -2 in December. Supplier delivery times eased to -1 from +1, while materials inventories weakened to -7 in January from 0 in December. Finished goods inventories fell to -2 from +2 in December.

Inflation indicators strengthened in January. The prices paid for raw materials index rose to 24, its highest reading in nine months, up from a low of 2 in October. The prices received index increased to 7 in January from 3 in December. It as the highest level since May, up from a low of -4 in July.

The composite index of expectations six months ahead rose sharply to 11 in January from 5 in December. Expectations for future shipments rose to 30 in January, its highest reading since August 2022, from 0 in July. Orders expectations also strengthened, with that index rising to 22 from 6 in December. Expectations continue to be for higher prices. The expectations index for raw material prices fell to 34 in January from 41, but was increased from the June low of 13. The expectations index for prices received for finished products of 25 compared to 26 in December and a low of 16 in October.

The latest survey was conducted between January 17-22, 2024 and included 90 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. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s SURVEYS database.

  • Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio.   Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984.   He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C.   In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists.   Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.

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