Kansas City Fed Manufacturing Activity Continued to Decline in October
by:Sandy Batten
|in:Economy in Brief
Summary
- Headline index was unchanged at -8, indicating that pace of decline was the same.
- Most components remained in negative territory.
- Expectations for six months ahead unchanged at an anemic 1.
The Federal Reserve Bank of Kansas City reported that its index of manufacturing sector activity was unchanged at -8 in October, meaning that activity continued to decline though at the same pace as in September. The index has been at zero or below since September 2022. Haver Analytics calculates an index along the lines of the ISM Purchasing Managers’ Index. That calculation for October edged up to 45.3 from 44.2 in September but remained below the critical 50 level that separates expansion from contraction for the fifth consecutive month.
Most component series remained in negative territory. New orders fell to -22, its lowest reading since May 2020, from -14 in September. Shipments rose to -11 from -15 and has been negative for six of the past seven months. Employment slipped to -4 in October, its first negative reading in four months, from 2 in September, while the average workweek index was unchanged at 0. Supplier delivery times slid to -4 from -1, while materials inventories rebounded to 0 from -15 in September and finished goods inventories rose to -1 from -10.
Inflation indicators also weakened in October. The prices paid for raw materials index fell to -2, its first negative reading since May 2020, from 7 in September. The prices received index fell to 0 in October from 2 in September.
The composite index of expectations six months ahead was unchanged at 1 in October, pointing to a very tepid outlook. Encouragingly, expectations for future shipments jumped up to 17 in October, its highest reading since September 2022, from 3 in September. However, orders expectations continued to be anemic with that index falling to 2 from 6 in September. Expectations continue to be for higher prices ahead but for more modest increases. The expectations index for raw material prices fell to 17 in October from 30 while the expectations index for prices received declined to 15 in October from 20 in September.
The latest survey was conducted between October 18-23, 2023 and included 88 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.
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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