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Economy in Brief

Kansas City Federal Reserve Factory Index Falls
by Tom Moeller  July 27, 2017

The Federal Reserve Bank of Kansas City reported that its index of regional manufacturing sector business activity eased to 10 in July, following an unrevised increase to 11 in June. It remained sharply improved versus the negative readings of 2015 and 2016. The ISM-Adjusted index held steady at 55.0 (NSA), up from the 2015 and 2016 averages below the break-even point of 50. During the last ten years there has been a 60% correlation between this index and the y/y change in factory sector production.

Movement amongst the index components continued to be mixed. New orders, supplier delivery speeds, material inventories and order backlogs each rose last month. Shipments, production and order backlogs weakened sharply. Employment held steady, but was positive versus the earlier negative readings.

The index of finished goods prices improved modestly after last month's sharp decline. The raw materials prices index rose slightly and was up versus the declines of 2015.

The overall expectations index declined sharply to the lowest level in three months. Expected new orders, shipments, employment, exports and production each fell while supplier delivery times gained. Capital spending held steady.

Expectations for finished goods prices declined sharply to the lowest point since November. Expected raw material prices fell, also to the lowest level since November.

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) Jul Jun May Jul '16 2016 2015 2014
Conditions Versus One Month Ago (% Balance) 10 11 8 -5 -2 -6 6
ISM-Adjusted Composite Index (NSA) 55.0 55.0 54.6 47.6 48.5 46.8 52.7
   New Orders Volume 10 4 9 -3 -1 -8 7
   Number of Employees 15 15 11 -5 -6 -10 5
   Production 4 23 -1 -13 1 -5 7
   Prices Received for Finished Product 5 -2 8 -10 -7 -5 5
Expected Conditions in Six Months 19 25 30 13 9 4 17
   New Orders Volume 25 39 46 28 19 11 26
   Number of Employees 26 32 24 7 8 6 18
   Production 29 42 50 24 20 11 28
   Prices Received for Finished Product 13 21 23 10 6 9 26
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