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Economy in Brief

Kansas City Federal Reserve Factory Index Holds Steady
by Tom Moeller  March 22, 2018

The Federal Reserve Bank of Kansas City reported that its index of regional manufacturing sector business activity remained unchanged at 17 during March. The index was up, nevertheless, from -12 in December 2015.

The ISM-Adjusted index improved slightly to 59.6 (NSA) from 58.2, up versus 41.5 in December 2015. During the last ten years, there has been a 57% correlation between this index and the q/q change in real GDP.

Movement amongst the index components was mixed. The new orders reading plunged while shipments and production weakened. Also down was the export order figure. Conversely, the supplier delivery time measure surged, indicating sharply slower delivery times. Order backlogs were little changed.

Employment strengthened to a record high. Thirty-three percent of respondents reported increased hiring while eight percent reported a decline in job levels. The employee workweek measure surged to the highest level since March 2011.

The index of finished goods prices slipped from the highest level since August 2008. Thirty-two percent of respondents paid higher prices, while six percent paid less. The raw materials prices index strengthened to the highest point since April 2011.

The overall expectations index declined moderately following its February surge to a record level. (The series dates back to 1981.) Expected orders, shipments and production eased from record heights. Expected export orders also fell m/m but remained near the seven-year high. Expected employment slipped m/m but remained strong versus 2016. The expected workweek dropped sharply.

Expected finished goods prices also eased but remained near the highest level since August 2008. Expected raw materials prices similarly slipped m/m, but remained strong versus the 2015 low.

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) Mar Feb Jan Mar '17 2017 2016 2015
Conditions Versus One Month Ago (% Balance)     17 17 16 18 14 -2 -5
ISM-Adjusted Composite Index (NSA) 59.6 58.2 57.3 60.8 56.7 48.5 46.8
   New Orders Volume -1 16 14 23 17 -2 -8
   Number of  Employees 26 23 18 13 15 -6 -10
   Production 20 21 16 33 17 1 -5
   Prices Received for Finished Product 24 26 21 8 7 -7 -5
Expected Conditions in Six Months 33 38 29 31 26 9 4
   New Orders Volume 42 49 36 41 35 19 11
   Number of Employees 36 41 33 43 31 8 6
   Production 42 56 37 50 41 20 12
   Prices Received for Finished Product 48 53 44 27 27 7 9
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