Kansas City Fed Manufacturing Index Is Unchanged in August

The Federal Reserve Bank of Kansas City reported that its August index of manufacturing sector activity rose to zero from -11 in July. It was the highest level since March and compared to five, one year earlier. It reached a high of 32 in March 2022. The ISM-Adjusted Index, calculated by Haver Analytics, rose to 48.9 (NSA) in August from 45.9 in July. It was the highest level in three months and compared to 51.7 twelve months earlier. Its high was 68.9 in March 2022.

Amongst the component series, the volume of new orders measure rose to -3 during August from -20 in July. It was the highest level since July of last year as an improved 27% of respondents reported higher new orders and 32% reported a decline. The shipments reading rose to 1 from -24 in July as 27% reported a rise in orders and 28% reported a decline. The production measure jumped to 12 from -20. It was the first positive reading since March. Thirty-one percent of respondents reported higher production while 24% reported a decline. The order backlog index increased to -12, up from a low of -38 in July. The finished goods inventory reading jumped to six from -3. It reached a low of -13 in April. The export order index declined to -8 from -3, though that was increased from a low of -15 three months earlier.

Amongst the labor market indicators, the employment measure eased to 1 in August from 4 in July. The reading remained up from a low of -12 in June as 18% of respondents reported higher employment while 16% reported a decline. The employee workweek measure rose to -6 from -20. It was best level in three months.

Pricing power remained restrained this month. The finished product price index of -6 compared to -7 in July. These readings were down from a high of 60 in August 2021. Eight percent of survey respondents reported higher prices while 14% reported declines. The raw materials price index improved to thirteen from nine in July. It was the highest level in three months but below the high of 84 in October 2021. Twenty percent of survey respondents reported higher prices while twelve percent reported a decline during August.

The composite expectations measure rose to 2 in August from -2 in July, but remained below the high of 38 in March of last year. Expectations for shipments, new orders & production rose moderately. The employment expectations index held steady at a level down sharply from the January 2022 high. The finished goods pricing measure rose moderately as did the raw materials pricing index.

The latest survey was conducted between August 16-21, 2023 and included 90 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 databases.

Inflation: Progress and the Path Ahead from Federal Reserve Chair Jerome H. Powell can be found here.