Research >> Economics
Kansas City Fed Manufacturing Activity Contracted Modestly
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Tenth District manufacturing activity contracted modestly again in January, but factories’ production expectations remained relatively optimistic for the months ahead. Many contacts blamed still-unresolved fiscal policy issues for caution in hiring and spending plans. Most price indexes edged lower, particularly expectations for raw materials prices.
The month-over-month composite index was -2 in January, largely unchanged from readings of -1 in December and -3 in November. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Manufacturing activity declined at most durable goods-producing plants, while nondurable producers noted a slight increase overall. Most other month-over-month indexes were below zero but higher than in December. The production index inched higher from -5 to -3, and the shipments, new orders, and order backlog indexes also rose somewhat but stayed in negative territory. In contrast, the employment index fell from -1 to -8, its lowest level since mid-2009, and the new orders for exports index also declined. The raw materials inventory index decreased from 1 to -4, and the finished goods inventory index dropped from 0 to -10.
Most year-over-year factory indexes fell for the second straight month, with several indexes continuing to post two-year lows. The composite year-over-year index decreased from 7 to 1, and the production, shipments, and new orders indexes also declined. The order backlog index decreased from -7 to -12, and the capital spending index dropped to its lowest level since late 2010. On the other hand, the employment index edged slightly higher. Both inventory indexes fell after rising last month.
Future factory indexes were mixed, although most indexes remained at favorable levels. The future composite index was unchanged at 7, and the future shipments index also stayed flat from the previous month. The future production index eased somewhat, and the future order backlog and capital expenditures indexes moved lower but remained positive. The future new orders index rose from 13 to 19, and the future employment and new orders for exports indexes also edged higher. Both future inventory indexes were unchanged at modestly negative levels.
Most price indexes eased after increasing last month. The month-over-month raw materials price index fell from 33 to 23, while the finished goods price index was unchanged. The year-over-year raw materials index was slightly lower, and the finished goods index inched down from 35 to 31. The future raw materials price index dropped from 63 to 47, and the future finished goods price index eased modestly, indicating fewer firms plan to pass recent cost increases through to customers.
Posted: January 24, 2013 Thursday 11:00 AM