Kansas City Fed Manufacturing Index Negative for the Ninth Straight Month in May
Summary
- May Composite Index at -2 reflects negative readings in new orders (-13) and production (-1), while employment (9) expands to the highest level since Mar. ’23.
- Price indexes increase, w/ both prices paid (19) and prices received (7) up to a four-month high.
- Expectations for future activity grow modestly, w/ prices paid (40) continuing to rise at a faster pace than prices received (26).
The Kansas City Fed manufacturing composite index was at -2 in May, up from -8 in April and -7 in March, the May Manufacturing Survey by the Federal Reserve Bank of Kansas City showed, indicating Tenth District manufacturing activity was essentially unchanged this month. The latest reading was unchanged from May 2023 but well below a peak of 31 in March 2022. “The pace of decline slowed in paper, chemical, and fabricated metal manufacturing while activity expanded in printing, nonmetallic mineral, and furniture manufacturing,” the Kansas City Fed reported. The ISM-adjusted index calculated by Haver Analytics was at 51.9 (NSA) in May, up from 48.2 in April and 50.5 in March, indicating an expansion in factory activity for the second time in three months. The latest ISM-adjusted figure was slightly above 50.9 in May last year but well below a record-high 68.9 in March 2022.
In the latest survey, the new orders index dropped to -13 in May after increasing to -6 in April, registering the 22nd straight negative reading. Thirty percent of respondents (NSA) reported orders gains in May while an increased 36% reported declines. The production index increased to -1 this month after falling to -13 in April, indicating the eighth contraction in nine months but at a less severe pace; the index was well below a high of 36 in March 2022. The shipments index rebounded to 8 this month, the highest level since July 2022, from -11 in April; however, having remained down from a peak of 40 in March 2022. The employment index rose to 9 in May, the highest level since March 2023, after falling to -2 in April, but it was down from a high of 30 in May 2022. A higher 23% of respondents (NSA) reported increases in the number of employees in May while a lessened 10% reported decreases.
The raw materials inventory index rebounded to -3 in May, the 11th negative reading in 12 months, from -15 in April; these figures were well below a high of 28 in March 2022. The order backlog index declined to -19 this month, the 22nd consecutive negative reading, after increasing to -18 in April; these numbers were significantly below a record-high 43 in July 2021. The supplier delivery time index increased to -3 in May, the 18th negative reading in 19 months, after falling to -5 in April; these readings were well below a high of 51 in March 2022.
The prices received index for finished products rose to 7 in May, the highest level since January, after falling to 0 in April. These readings, however, remained well below a high of 50 in June 2022 and a record-high 62 in August 2021. An increased 19% of respondents (NSA) reported higher prices received in May while only 6% reported price declines. The prices paid index for raw materials rose to 19 this month, the highest reading in four months, after rising to 18 in April; nevertheless, having remained significantly down from a high of 73 in April 2022 and a record-high 87 in October 2021.
Expectations for future activity improved modestly, with activity in most categories expected to gain and raw materials prices expected to rise at a faster pace than finished product prices. The expectations index for six months ahead was at 6 in May, up from 2 in April and 1 in March. The expectations indexes for production (21), new orders (18), shipments (15), and employment (14) rose in May, while those for raw materials inventories (-17) and supplier delivery time (-7) fell for the month. The expectations index for raw materials prices jumped to a five-month-high 40 in May after declining to 30 in April, while the index for finished goods prices held at 26 for the third successive month.
The latest survey was conducted for a six-day period from May 15-20, 2024 and included 97 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.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has 20+ years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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