FRB Kansas City Manufacturing Activity Continued to Decline in August
by:Sandy Batten
|in:Economy in Brief
Summary
- The index rose to -3 from -13, indicating that the pace of decline had slowed.
- Expectations for future activity remained positive, rising in August from July.
- The production index increased to 6, the first positive reading in six months.
- All other major components of the headline index improved in August but remained at zero or below.
The Federal Reserve Bank of Kansas City reported that its index of manufacturing sector activity rose to -3 in August from -13 in July. The headline index has not been positive since September 2022. Haver Analytics calculates an index based on the Kansas City results which is comparable to the ISM PMI series. This index rose to 47.4 (NSA) in August, its third consecutive month below the 50 reading that separates expansion from contraction.
The August survey was open for a six-day period from August 14-19, 2024 and included 92 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.
Nondurable manufacturing was essentially flat, while durable goods manufacturing fell somewhat, driven by transportation equipment, fabricated metal, and machinery. The month-over-month indexes were lackluster, but all increased from last month’s readings. Production rebounded from -12 to 6 while the volume of new orders stayed negative at -12 (vs -21 in July) and backlogs posted a reading of -19 (vs -24). The two employment indexes also declined further in August but at a slower pace than in July with the employment index increasing to -7 from -12 and the average workweek index rising to -10 from -17.
The year-over-year composite index for factory activity ticked down to -14 from -13 as production, shipments, and new orders all continued to fall considerably. Employment levels decreased moderately while capital expenditures stayed steady with a reading of 1 vs 5 in July.
Inflation indicators rose slightly in August. Prices paid for raw materials edged up to 18 from 17 in July. Prices received for finished products jumped to 6, its highest reading in three months, from zero in July.
The composite index of expectations in six months increased to 8 in August, the highest reading since January, from 5 in July. Key components generally increased. Expected production rose to 20 from 13; employment increased to 17 from 13; new orders climbed to 12 from 8. However, expected capital expenditures fell to -4, the first negative reading since November 2023, from 10 in July.
The series dates back to July 2001. The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Data for the Kansas City Fed Survey can be found in Haver’s SURVEYS database.
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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