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Kansas City Fed Manufacturing Activity expanded at a solid pace again in September
Tenth District manufacturing activity expanded at a solid pace again in September, though growth was somewhat slower than the rapid rate earlier in the year. Expectations for future growth remained positive, despite continued concerns about trade and tariffs. Price indexes mostly increased.
The month-over-month composite index was 13 in September, largely unchanged from 14 in August but down from 23 in July. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Growth in factory activity was driven by durable goods plants, specifically from increases in nonmetallic minerals, metals, and electronics, while activity at nondurable goods plants slowed slightly. Month-over-month indexes were mixed compared to August, but all remained positive. The shipments and employment indexes declined, and the order backlog index dipped slightly. The production index was unchanged from last month’s reading. On the other hand, the new orders for exports index inched up and the new orders index increased. The finished goods inventory index edged lower while the raw materials inventory rose modestly.
Most year-over-year factory indexes increased in September. The composite index grew from 37 to 41, and new orders, employment, capital expenditures, and new orders for exports all edged higher. Additionally, the production, shipments, and order backlog indexes all rose moderately this month after a slight decline in August. The finished goods inventory index inched up and the raw materials inventory index continued to increase.
Future factory activity expectations eased slightly, but remained favorable. The future composite index dipped from 29 to 27, and the future production, shipments, employment, and new orders indexes also edged lower. In contrast, the future capital expenditures and new orders for exports improved modestly and the future order backlog index inched higher. The future raw materials index grew from 11 to 17, while the future finished goods inventory index eased slightly.
Most price indexes increased in September. The month-over-month raw materials price index edged up from 44 to 45, while the finished goods price index dipped from 27 to 24. The year-over-year finished goods price index rose from 50 to 56, and the year-over-year raw materials price index also increased from 67 to 79. The future finished goods price index grew from 28 to 44, and the future raw materials price index expanded from 40 to 57.
This month firms were asked special questions about the impact of tariffs and recent federal tax cuts. More than 70 percent of respondents reported a slight or strong negative impact on business from tariffs. Roughly 7 percent of firms reported positive impacts from tariffs, while more than 22 percent of respondents reported no impact on business from tariffs. On tax cuts, nearly 38 percent of firms reported no savings, 31 percent reported less than five percent savings, and 18 percent of firms reported five to ten percent savings. Only 14 percent of firms reported more than ten percent savings from the most recent federal tax cuts.
Posted: September 27, 2018 Thursday 11:00 AM