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Kansas City Fed Manufacturing Activity Grew Slightly in June
Tenth District manufacturing activity grew slightly after sharply decreasing the past three months, but remained well below year-ago levels. Expectations for future activity rebounded moderately. Month-over-month price indexes increased in June after dropping sharply in previous months. District firms expected prices for both finished goods and raw materials to expand in the next six months.
Factory Activity Grew Slightly in June
The month-over-month composite index was 1 in June, up considerably from -19 in May and a record low of -30 in April. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The improvement in activity was driven by non-durable goods plants, while durable goods factories, especially nonmetallic mineral products, primary metals, fabricated metals, and computer and electronics plants continued to decline. Month-over-month indexes were mixed. Production, shipments, new orders, and supplier delivery time indexes recovered to positive levels, while indexes for order backlog, employment, new orders for exports, and inventories remained negative. Year-over-year factory indexes mostly remained highly negative in June, but the composite index moved up slightly from -35 to -29. The future composite index rose considerably in June, rebounding from -2 to 9.
This month contacts were asked special questions about lending assistance programs and the effects of COVID-19 on revenue and employment. 76% of factory contacts had applied for the Small Business Administration (SBA) Paycheck Protection Program since March 13, 2020 (up from 67% reported in April), and 97% of contacts reported receiving the loan (Chart 2). For firms that received an SBA loan, 86% reported that it prevented layoffs and/or furloughs (Chart 3). 53% of SBA loan recipients surveyed indicated the loans prevented wage reductions, and 51% said it helped pay bills and/or rent. Overall, 80% of firms reported the impact of coronavirus developments had decreased their firm’s revenues in 2020 vs. 2019, by an average of 25%. Additionally, the majority of firms reported lower employment in June compared with February, and while employment expectations were positive in June, most firms did not anticipate returning to February employment levels by the end of 2020.
Posted: June 25, 2020 Thursday 11:00 AM