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Kansas City Fed Manufacturing Activity declined more sharply in May
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Tenth District manufacturing activity declined more sharply in May than in previous months and producers’ expectations also fell, with both reaching their lowest levels since mid-2009. However, most price indexes increased slightly, reversing a recent trend of decline. In a special question about hiring plans, the majority of firms indicated they were planning to either leave employment levels unchanged or increase them slightly over the next twelve months.
The month-over-month composite index was -13 in May, down from -7 in April and -4 in March. The last time the composite index was lower was in April 2009. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The overall slower growth was mostly attributable to declines in durable goods manufacturing, including a continued decline in aircraft production and further weakness in metals and machinery. In addition, several nondurable goods plants also reported sluggish activity, particularly for plastics and food production. Production fell most sharply in energy-producing states like Oklahoma and New Mexico, but it was also down in most other District states. The majority of other month-over-month indexes also decreased from the previous month. The production index contracted from -2 to -13, and the shipments and new orders indexes also fell. The order backlog, employment, and new orders for exports indexes edged higher but still remained well below zero. The finished goods inventory index increased from -1 to 0, while the raw materials inventory index dropped into negative territory.
Year-over-year factory indexes were mixed but remained negative overall. The composite year-over-year index inched lower from -3 to -5, and the production, shipments, new orders, and order backlog indexes also became more negative. The employment index rose from -8 to 0, while the capital expenditures and new orders for exports indexes were basically unchanged. The finished goods inventory index increased from 4 to 6, but the raw materials inventory index eased slightly.
Most future factory indexes fell in May, with the notable exception of employment. The future composite index decreased from 6 to 0, and the future production, shipments, and capital expenditures indexes also edged lower. The future new orders index dropped from 21 to 2, its lowest level since May 2009, and the future order backlog index moved into negative territory. In contrast, the future employment index rebounded from -2 to 7, and the future new orders for exports indexes rose slightly from -6 to -2. The future finished goods inventory index eased from -2 to -5, while the future raw materials inventory index increased somewhat.
Most price indexes rose modestly in May, although month-over-month indexes were still negative. The month-over-month finished goods price index increased from -10 to -4, while the raw materials price index was basically unchanged. The year-over-year finished goods price index edged up from 12 to 14, while the raw materials price index was stable. The future raw materials price index rose from 8 to 15, and the future finished goods price index also increased moderately.
Posted: May 21, 2015 Thursday 11:00 AM