Kansas City Fed Factory Index Is Unchanged in February
by:Tom Moeller
|in:Economy in Brief
Summary
- Expectations continue to deteriorate.
- Pricing power remains weak.
The Federal Reserve Bank of Kansas City reported that their manufacturing sector business activity index of zero in February compared to modestly negative readings between -1 and -4 in the prior four months. The Kansas City measure is a diffusion index with positive readings indicating more respondents reporting increases than decreases in business activity. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.
The ISM-Adjusted Index (NSA) of 49.6 compared to 49.7 in January but was increased from 44.5 in December. These readings were down from a high of 68.9 in March 2022.
A modest improvement in the current conditions measure reflected uneven changes amongst the component series. The new orders measure rose to its least negative reading since September while the supplier delivery time measure also improved. Deteriorating sharply m/m was the shipments measure along with materials inventories, production and orders backlogs.
The employment index rose sharply to 11, the highest level since August. An improved 29% of survey respondents reported more hiring while a lessened 16% reported a decline. Moving in the opposite direction, however, was the employee workweek reading which fell to the lowest level in nearly three years.
On the inflation front, the prices received index for finished products rose slightly to 17 but remained well below the high of 60 in August 2021. Twenty-six percent of respondents reported higher prices while a lessened 10% reported a decline. The raw materials price measure rose to its highest level since October.
The future composite index (expectations in six months) fell sharply to 1, its lowest level since May 2020. Expected orders, shipments, employment and delivery times each declined, but expected production and inventories improved. Expectations for finished goods prices received also improved to the highest level in three months. The expected raw materials price measure similarly rose.
The diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. The September survey was conducted during the third week of the month and included 95 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.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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