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Economy in Brief

Kansas City Fed Manufacturing Index Increases Again in February
by Tom Moeller  February 25, 2021

• Growth continues at quickest rate since June 2018.

• Component improvement is widespread.

• Expectations for six months ahead broadly strengthen.

The Federal Reserve Bank of Kansas City reported that its manufacturing sector business activity index rose to 24 in February from 17 in January. The headline figure remained well above the all-time low of -30 posted in April.

The ISM-Adjusted Index (NSA) rose to 60.6 in February from 58.1 in January and remained well above the critical level of 50 that separates expansion from contraction. It also remained well above the low of 37.6 in April of last year.

Movement amongst the individual series was mostly positive. The supplier delivery time index soared to a record 40, indicating sharply slower product delivery speeds. The employment series surged to 21, the highest level since July 2018. The production series rose to 26, the highest level since November 2018. The order backlog measure also surged. Working lower was the new orders measure which fell to 16 after having averaged around 24 for six months.

On the inflation front, the prices received index for finished products strengthened to 27, the highest level in two and one-half years. It compares to the deflationary readings registered earlier this year. The raw materials index surged to 68, up from -16 in April of 2020 and the highest reading since April 2011.

The expectations-in-six months composite reading strengthened to 34 in February, up sharply from 16 a year ago and well above -19 in March of last year. Expected new orders, shipments and employment each improved sharply.

Expectations for prices received rose to 40 in February, up from expected price deflation early last year. Expectations for raw materials prices also surged to 68 this month, the highest level since February 2018.

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.

Kansas City Federal Reserve Manufacturing Survey (SA) Feb Jan Dec Feb'20 2020 2019 2018
Conditions Versus One Month Ago (% Balance)     24 17 14 5 0 0 17
ISM-Adjusted Composite Index (NSA) 60.6 58.1 53.0 52.7 50.1 50.0 58.9
   New Orders Volume 16 25 24 8 1 -3 17
   Number of  Employees 21 13 7 -4 -4 -1 17
   Production 26 22 12 8 0 2 19
   Prices Received for Finished Product 27 19 9 9 2 7 22
Expected Conditions in Six Months 34 24 17 16 10 12 28
   New Orders Volume 50 31 21 21 12 17 35
   Number of Employees 28 25 22 20 11 15 33
   Production 44 46 20 21 14 19 40
   Prices Received for Finished Product 40 38 25 28 16 26 42
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