Economy
Fed Reserve Indexes Show Manufacturing Soft in September
Written by Sandy Williams
October 2, 2016
Last week’s Federal Reserve manufacturing reports showed mixed results in September. Kansas City, Dallas, and Richmond Federal Reserves all reported expansion in production levels but manufacturing conditions remained soft, especially in the Dallas and Richmond areas.
Kansas City
The Kansas City index came in at 6.0 for its best reading since December 2014 and its second positive reading in the last four months. The Tenth District composite index was in contraction for 15 months in a row and the improvements in the past four months suggest manufacturing activity may be stabilizing in the region.
The Kansas City Production index climbed from -7 to 15 with non-durable goods improving modestly and a surge seen in durable goods production, especially for machinery and metals production. Indexes for new orders, employment, new export orders and order backlogs rose modestly while the index for supplier delivery time dipped into negative territory. Raw material inventories rose from -1 to 8. Prices for finished goods were unchanged and raw material prices edged lower.
Indexes for future manufacturing activity were positive although the composite index dipped one point. The future capital spending index was at its highest since in more than a year. Orders and employment are expected to improve while future shipments and order backlogs remain flat. Reductions in raw materials inventories are expected as finished goods rise.
Dallas
The Dallas general business activity index remained negative for the 21st consecutive month registering at -3.7, but the index for production rose 12 points to 16.7. The company outlook index also improved, moving to a positive reading of 6.7. In general, results of the survey were mixed in September with demand indicators in negative territory and capacity utilization and shipments making double digit gains. Input prices remained under pressure but holding steady during the month while selling prices were flat. Wages rose with the index reaching 21.0
The future general business activity Index rose to 9.3, the fourth positive reading in a row. The company outlook index rose to 17.8 while other indexes for future activity remained positive but fell slightly in September’s survey.
Richmond
The composite index for Fifth District manufacturing gained 3 points but remained in contraction at -8. Weakness was prevalent in most of the indices with shipments and new orders improving by double digits but staying in negative numbers. Manufacturing employment fell into contraction with a reading of -13, the first time the index had a negative reading in three years. The capacity utilization index gained eight points to read at -11. Backlogs and lead times remained essentially unchanged. Indexes for raw materials and finished goods fell by 2 and 4 points, respectively.
Richmond manufacturers were less optimistic about future business conditions. Backlogs are expected to level off and lead times to lengthen in the next six months. The future capacity utilization index declined seven points to a reading of 22. Indices for future hiring, wages, and workweek all declined.
Sandy Williams
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