Economy

Kansas City Fed Survey Shows Manufacturing Expanding

October 27, 2016

Manufacturing activity in the Tenth District expanded at a moderate pace in October, according to the latest survey by the Federal Reserve Bank of Kansas City.

“This was the second consecutive month of rising factory activity in the Tenth District, the first time that has happened in nearly two years,” said Reserve Bank of Kansas City vice president and economist Chad Wilkerson. “Much of the improvement recently has been in machinery and fabricated metals manufacturing.”

The composite index registered 6 in October, unchanged from September and up from -4 in August. Strength in metals, machinery, and chemical production industries led expansion for the month. Month-over-month gains were seen in production, shipments, new orders and order backlogs. The employment index, at 7, was at its highest level in nearly two years. Indexes for raw and finished inventories fell substantially in October.

Prices for finished goods moved higher from -7 to -5 while the index for raw material prices moved lower.

The composite for the six month outlook gained 8 points registering at 18, the highest level in over a year. Most of the components of the index increased considerably in the Tenth District. Future new orders and order backlogs remained positive although slightly weaker. Prices for finished goods were expected to remain about the same while future raw material prices were expected to moderate.

Respondent comments include:

“We are just now beginning to see the impact of the steel tariffs imposed earlier this year. Our competition is beginning to publicize price increases and we are looking at how that will play out in what appears to be a softening market.”
“There have been stronger bookings and shipments than budgeted. A great surprise and it continues into October.”
“Unemployment numbers in our area are very low. We have a need to hire 10-15 people but can’t find stable associates that are interested in working.”
“New oil exploration and production is appearing on the horizon. New orders hopefully will follow.”
“The international marketplace is still weak and we are struggling with low priced Chinese goods.”
“International business has been down for the past two years and primarily offset by increase in the U.S. market.”
“Fourth quarter is shaping up nicely. It is always the best quarter of the year for us. Skilled labor is still a challenge for us.

Note: The Tenth District covered by the Federal Reserve Bank of Kansas City includes the western third of Missouri; all of Kansas, Colorado, Nebraska, Oklahoma and Wyoming; and the northern half of New Mexico.