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Kansas City Fed Manufacturing Activity expanded further in December
Tenth District manufacturing activity expanded further in December. Manufacturing activity was still below year ago levels, but expectations for future activity were positive. Prices paid for raw materials and finished goods rose further from a month ago and a year ago. District firms expected prices for both raw materials and finished goods to increase in the next six months.
Factory Activity Expanded Further
The month-over-month composite index was 14 in December, up from 11 in November and 13 in October. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Activity at non-durable plants declined slightly, while activity at durable goods factories expanded more. Food and beverage production dipped, but transportation equipment manufacturing increased. Month-over-month indexes were positive, indicating continued expansion. Shipments, new orders, order backlog, employment, new orders for exports, and supplier delivery time increased at a faster pace. Materials inventories rebounded while finished goods inventories declined further. Year-over-year factory indexes declined slightly in December, and the composite index dipped from -12 to -14. The future composite index was slightly lower than 21 in November but remained positive at 17 in December.
This month contacts were asked special questions about the recent surge in COVID-19 cases and their expectations regarding capital outlays and restraints. More than three-quarters of factory contacts indicated the recent surge in COVID-19 cases has negatively affected their firm’s business (Chart 2). Many contacts noted that more employees have missed work recently after testing positive for COVID-19 or being exposed to the virus, and other contacts reported weaker demand from customers. Regarding capital outlays, 71% of firms reported investing in equipment to enhance production capacity as their primary motivation for the upcoming year, and 61% listed labor-saving technology. Another 35% of contacts said IT infrastructure was a primary motivator for capital outlays in the upcoming year. On the other hand, over half of firms indicated they will be reducing capital outlays for facilities for the upcoming year.
Posted: December 17, 2020 Thursday 11:00 AM