Research >> Economics
Kansas City Fed Manufacturing Activity Rose Moderately in August
|
Tenth District manufacturing activity rose moderately from July but remained below year-ago levels, while expectations for future activity expanded further (Chart 1, Tables 1 & 2). Prices paid for raw materials increased and prices received for finished goods were slightly positive. District firms expected prices for both finished goods and raw materials to expand more in the next six months.
Factory Activity Rose Moderately in August
The month-over-month composite index was 14 in August, moderately higher than 3 in July and 1 in June (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Non-durable goods factories continued to drive the uptick in recent activity, especially food and beverage manufacturers. Activity at durable goods plants grew slightly. The majority of month-over-month indexes were positive, indicating continued expansion. Production, shipments, and new orders grew considerably compared to a month ago. Only the month-over-month finished goods inventories index was still negative, but it declined at a slower pace in August. Most year-over-year factory indexes remained negative in August, but slightly less negative than in previous months. The future composite index expanded further in August to 19, up from 14 in July.
Special Questions
This month contacts were asked special questions about the impact of government stimulus and unemployment benefits. Nearly two-thirds of contacts reported that government stimulus programs positively contributed to their business’s performance in the past three months (Chart 2). Many firms noted the helpfulness of Paycheck Protection Program (PPP) loans in retaining staff, and around half of firms indicated their business outlook was dependent on additional government support of some sort. At the same time, almost 60% of contacts indicated the CARES Act extra $600/week or recent $400/week boost in unemployment benefits created some or significant difficulties in bringing furloughed or laid-off employees back to work (Chart 3). More than 40% of firms also reported difficulty sourcing inputs, especially from international suppliers.
Posted: August 27, 2020 Thursday 10:00 AM