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Economy in Brief

Kansas City Federal Reserve Factory Index Hits Record High
by Tom Moeller  April 26, 2018

The Federal Reserve Bank of Kansas City reported that its index of regional manufacturing sector business activity surged to a record 26 in April following stability during the prior two months at 17. The index was up from its low of -12 in December 2015.

The ISM-Adjusted index also jumped to a record 63.8 (NSA), up versus 41.5 in December 2015. During the last ten years, there has been a 59% correlation between this index and the q/q change in real GDP.

Movement amongst the index components was generally positive. The new orders, shipments and production readings surged. The supplier delivery time measure retraced its May jump, indicating sharply quickened delivery times. Order backlogs also increased to a record level.

The employment reading was stable at its record high. Thirty-four percent of respondents reported increased hiring while ten percent reported a decline in job levels. The employee workweek measure declined following its March surge.

The index of finished goods prices increased to the highest level since September 2008. Thirty-eight percent of respondents paid higher prices, while five percent paid less. The raw materials prices index eased from the highest point since April 2011.

The overall expectations index declined moderately for the second straight month. Expected orders and employment declined while expected shipments and production improved. Expected export orders fell sharply m/m to the lowest level since December. The expected workweek improved following a sharp decline in March.

Expected finished goods prices improved m/m and matched the highest level since August 2008. Expected raw materials prices eased 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) Apr Mar Feb Apr '17 2017 2016 2015
Conditions Versus One Month Ago (% Balance)     26 17 17 10 14 -2 -5
ISM-Adjusted Composite Index (NSA) 63.8 59.6 58.2 52.5 56.7 48.5 46.8
   New Orders Volume 37 -1 16  11 17 -2 -8
   Number of  Employees 26 26 23 11 15 -6 -10
   Production 33 20 21 15 17 1 -5
   Prices Received for Finished Product 29 24 26 6 7 -7 -5
Expected Conditions in Six Months 31 33 38  19 26 9 4
   New Orders Volume 30 42 49 18 35 19 11
   Number of Employees 35 36 41 29 31 8 6
   Production 44 42 56 29 41 20 12
   Prices Received for Finished Product 53 48 53 27 27 7 9
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