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Economy in Brief

Kansas City Federal Reserve Reports Moderating Factory Activity
by Tom Moeller  April 25, 2019

The Federal Reserve Bank of Kansas City indicated that its index of regional manufacturing sector business activity declined to five in April from 10 in March. It remained down versus the high of 26 reached last May.

The ISM-Adjusted index fell to 53.5 (NSA) this month from 56.4 and remained lower than its high of 64.2 reached in May 2018. Since 2008, there has been a 56% correlation between this index and the q/q change in real GDP.

The shipments, production, supplier delivery times and order backlog readings deteriorated m/m, and were down significantly from the highs of early last year. The new orders series improved, however, to the highest level since November. The export order index also surged to the highest level since May of last year.

The employment reading fell and remained sharply below the high reached nine months earlier. A greatly weakened 19 percent (NSA) of respondents reported increased hiring while a higher 17 percent reported a decline in job levels. The employee workweek index stabilized after a sharp recovery in March.

The index of finished goods prices improved slightly after falling earlier to the lowest level since Q3'17. A slightly higher 19% of respondents paid higher prices, while a steady six percent paid less. The raw materials prices index was unchanged at the lowest level since October 2016.

The overall expectations index weakened to 11, the lowest level since September 2016. It remained down sharply from its February 2018 high of 36. Declines spread throughout the component series. The expected shipments, new orders and employee workweek readings were notably weak. Expected production fell to a nearly three-year low. The expected capital expenditure figure remained well below its high twelve months earlier.

The expected finished goods price index eased m/m and has been moving sideways for six months, well below the highs twelve months earlier. The expected raw materials price figure has shown similar movement.

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 and northern New Mexico. Data for the Kansas City Fed Survey can be found in Haver's SURVEYS database.

Kansas City Federal Reserve Manufacturing Survey (SA) Apr Mar Feb Apr '18 2018 2017 2016
Conditions Versus One Month Ago (% Balance)     5 10 1 24 18 14 -2
ISM-Adjusted Composite Index (NSA) 53.5 56.4 48.5 63.8 58.9 56.7 48.5
   New Orders Volume 10 4 -10 32 17 17 -2
   Number of  Employees 2 14 10 24 17 15 -6
   Production 12 17 -4 29 18 17 0
   Prices Received for Finished Product 10 7 18 27 22 7 -7
Expected Conditions in Six Months 11 22 13 31 28 26 9
   New Orders Volume 12 29 13 33 35 35 19
   Number of Employees 19 34 28 35 33 31 8
   Production 14 28 18 44 40 40 20
   Prices Received for Finished Product 35 39 34 50 42 27 7
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