Research >> Economics
Kansas City Fed Manufacturing Activity was Largely Unchanged
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Tenth District manufacturing activity was largely unchanged in May, following rapid growth in recent months. Producers’ expectations diminished slightly, but were still solid overall. Price indexes eased this month, with fewer firms raising selling prices and some slowdown in materials price increases.
The month-over-month composite index was 1 in May, down from 14 in April and 27 in March. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Growth in factory activity eased at both durable and non-durable goods producing plants. Most other month-over-month indicators also fell in May, with some moving into negative territory. The production index decreased from 17 to -2, and the shipments, new orders, and order backlog indexes also declined for the second straight month. By contrast, the employment index eased but remained well above zero, and the new orders for exports index inched slightly higher. The raw materials inventory index fell further from 7 to 1, while the finished goods inventory index edged up.
Growth in most year-over-year factory indexes moderated from the previous survey. The composite year-over-year index eased slightly from 31 to 30, and the production, new orders, shipments, and order backlog indexes also fell modestly in May. The employment index was unchanged at 25, still at its second-highest level since early 2007. The capital expenditures index rebounded from 4 to 14, while the new orders for exports index edged down somewhat. Both inventory indexes increased after falling the previous month.
Future factory indexes eased marginally, but continued to show fairly solid readings. The future composite index decreased from 20 to 13, and the future production, shipments, new orders, and order backlog indexes also slowed. The future employment index eased somewhat, and the future capital expenditures index also moved slightly lower. In contrast, the future new orders for exports index rebounded from 12 to 17. The future raw materials inventory index decreased from 15 to 3, and the future finished goods index also slowed.
Price indexes fell in May, with a slight decrease in raw materials price indexes and some moderation in selling prices, but remained well above zero. The month-over-month raw materials price index plunged from 70 to 54, and the finished goods price index also edged lower. The yearover-year finished goods price index eased slightly, and the raw materials price index fell somewhat. The future raw materials price index dropped for the second straight month, and the future finished goods price index also decreased, indicating fewer firms plan to pass recent cost increases through to customers.
This month’s survey included special questions about wage and benefit cost pressures. On expected wage increases per employee (excluding overtime and variable pay), about 20 percent of firms will have no increase in 2011 relative to 2010, while about 40 percent will have raises of less than 2.5 percent and 40 percent will have raises over 2.5 percent. On expected benefits per employee (employer contribution only), about 25 percent estimate the increase from 2010 to 2011 to exceed 5 percent, and another 30 percent expect increases in excess of 2.5 percent.
Posted: May 26, 2011 Thursday 11:00 AM