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Kansas City Fed Manufacturing Activity declined in August
Tenth District manufacturing activity declined in August, while expectations for future activity edged higher (Chart 1). The month-over-month price indexes for raw materials and finished products decreased, turning negative for the first time since 2016. Firms continued to expect prices to rise over the next 6 months, however.
Factory Activity Declined in August
The month-over-month composite index was -6 in August, down from -1 in July and 0 in June, and the lowest reading since March 2016 (Table 1). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The drop in manufacturing activity was driven by declines at both durable and nondurable plants, but especially from decreases in primary metal, electrical equipment, appliances, paper, printing, and chemical manufacturing. Most month-over-month indexes decreased in August, and the shipments and supplier delivery time indexes also turned negative. All of the year-over-year factory indexes decreased in August, and the composite index fell from 11 to -1. On the other hand, the future composite index edged higher from 9 to 11, as expectations for shipments, order backlog, employment, and new orders for exports grew slightly.
This month contacts were asked special questions about the impact of recent tariff announcements and their expectations regarding the duration of trade tensions. Over 55 percent of regional manufacturing contacts expect the most recent round of announcements of U.S. tariffs on Chinese goods to negatively impact their business, while less than 6 percent expect a positive impact (Chart 2). More than 37 percent of firms expect trade tensions to persist for 1-2 years, and 29 percent of firms expect trade tensions to last for 6-12 months (Chart 3). However, 13 percent of contacts expect trade tensions to subside within 6 months, while 20 percent expect trade tensions to last for more than 2 years.
Posted: August 22, 2019 Thursday 11:00 AM