Research >> Economics
Kansas City Fed Manufacturing Activity Continued to Grow Slightly in July
Tenth District manufacturing activity continued to grow slightly after decreasing sharply in the spring, but still remained well below year-ago levels. Expectations for future activity continued to improve slightly. District firms continued to expect prices for both finished goods and raw materials to expand in the next six months.
Factory Activity Continued to Grow Slightly in July
The month-over-month composite index was 3 in July, up slightly from 1 in June and up considerably from -19 in May (Tables 1 & 2). 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 still driven by non-durable goods plants. However, activity in most durable goods factories also improved except for continued decreases in fabricated metals and computer and electronics plants. Most month-over-month indexes were positive. Production, shipments, new orders, and supplier delivery time indexes remained positive, and indexes for order backlog and employment recovered to positive levels. Only new orders for exports and inventories indexes remained negative. Most year-over-year factory indexes increased but remained negative in July. The future composite index continued to rise in July, increasing slightly from 9 to 14.
This month contacts were asked special questions about changes in business costs and their need for physical infrastructure since managing the effects of COVID-19. 67% of contacts reported that their need for physical infrastructure had not changed in the past 6 months, and 69% anticipated that that need would not change in the medium term (1-2 years) (Chart 2). Additionally, 66% of contacts said they had utilized a work from home policy in the last 6 months, but very few said that any portion of their workforce will now permanently work from home. In terms of business costs, 42% of firms reported that their costs have increased in the past 6 months, 26% reported no change, and 21% reported decreases.
Posted: July 23, 2020 Thursday 11:00 AM