KC Fed: Manufacturing activity continued at a solid pace in April

Growth in Tenth District manufacturing activity continued at a solid pace, and producers remained moderately optimistic about the future, according to a new report released by the Federal Reserve Bank of Kansas City. Price indexes were mixed, with further increases in raw materials prices, but finished goods prices were mostly stable.

The net percentage of firms reporting month-over-month increases in production in April was 24, up from 18 in March and 19 in February (Tables 1 & 2, Chart). Production increased at both durable and nondurable-goods-producing plants. Most other month-over-month indicators climbed higher in April. The shipments, new orders, and order backlog indexes all increased, and the employment index recorded its highest level in over two years. Meanwhile, the new orders for exports index edged up for the second straight month. The raw materials inventory index fell from -3 to -7, and the finished goods inventory index eased from -7 to -9.

Year-over-year factory indexes showed marked improvement in April, with many indexes finally reaching positive territory. The production index jumped from -1 to 14, and the shipments, new orders, and order backlog indexes also rose considerably, with all at their highest levels since late 2007. The employment index improved from -31 to -18 and the capital expenditures and new orders for exports indexes also increased somewhat. Both inventory indexes edged up marginally.

Future factory activity indexes were mixed after rising modestly last month. The future production index eased from 33 to 22, and the future shipments, order backlog, and employment indexes also fell somewhat. In contrast, the future new orders index inched higher, and the future capital expenditures and new orders for exports indexes also increased moderately. The future raw materials inventory index eased slightly, while the future finished goods inventory index edged up from -4 to 0.

Price indexes were mixed in April, with an increase in raw materials price increases but little to no change in selling prices. The month-over-month raw materials price index climbed from 42 to 53, while the finished goods price index remained unchanged. The year-over-year raw materials price edged higher from 55 to 58, with the finished goods price index stable at 7. The future raw materials price index rose after falling slightly last month, but the future finished goods price index eased after five straight months of increase.

Table1       Summary of Tenth District Manufacturing Conditions, April 2010   April vs. March (percent)1 April vs. Year Ago (percent)1 Expected in Six Months (percent)1 Plant Level Indicators Increase No Change Decrease Diff Index2 SA Index3 Increase No Change Decrease Diff Index2 Increase No Change Decrease Diff Index2 SA Index3   Production 47 37 14 33 24 47 18 33 14 46 32 20 25 22 Volume of shipments 51 32 14 36 27 48 17 33 15 45 32 21 23 21 Volume of new orders 47 30 21 25 15 48 19 29 19 50 28 19 31 28 Backlog of orders 38 38 22 15 11 33 28 36 -3 32 45 19 12 9 Number of employees 24 59 15 9 5 25 30 43 -18 31 56 12 19 18 Average employee workweek 25 61 12 13 6 23 50 25 -1 23 59 16 6 4 Prices received for finished product 13 76 9 4 5 33 39 25 7 29 56 12 17 17 Prices paid for raw materials 54 42 2 52 53 71 16 12 58 67 24 7 60 61 Capital expenditures   26 38 32 -5 29 44 20 9 11 New orders for exports 12 69 9 3 5 19 58 12 7 18 62 8 9 11 Supplier delivery time 16 73 5 10 10 21 63 13 8 19 74 4 14 15 Inventories:            Materials 24 46 28 -4 -7 28 30 40 -12 23 53 21 2 3      Finished goods 15 59 21 -5 -9 23 39 33 -9 22 53 20 1 0 1Percentage may not add to 100 due to rounding. 2Diffusion Index. The diffusion index is calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. 3Seasonally Adjusted Diffusion Index. The month vs. month and expected-in-six-months diffusion indexes are seasonally adjusted using Census X-12. Note: The April survey included 121 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Table2 Historical Manufacturing Survey Indexes   Apr'09 May'09 Jun'09 Jul'09 Aug'09 Sep'09 Oct'09 Nov'09 Dec'09 Jan'10 Feb'10 Mar'10 Apr'10 Versus a Month Ago (seasonally adjusted)   Production -6 -2 1 0 -5 12 5 15 7 13 19 18 24 Volume of shipments -5 -1 4 4 -13 8 0 8 3 9 14 17 27 Volume of new orders -7 2 8 6 -8 7 7 10 0 9 11 12 15 Backlog of orders -26 -18 -1 -11 -17 -10 -1 0 -4 0 -5 7 11 Number of employees -22 -15 -14 -15 -10 -3 -4 0 -1 2 -4 3 5 Average employee workweek -15 -14 2 -13 -9 8 -3 4 0 4 -3 1 6 Prices received for finished product -17 -17 -14 -16 -12 -6 -6 1 -1 0 0 5 5 Prices paid for raw materials -23 -17 -9 -7 0 9 12 21 22 42 45 42 53 Capital expenditures n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a New orders for exports -11 -7 -2 0 0 2 3 2 5 6 0 4 5 Supplier delivery time -4 -6 -3 -4 0 3 3 11 8 8 12 11 10 Inventories:      Materials -25 -19 -22 -23 -20 -15 -4 -6 -12 -7 -1 3 -7 Inventories:      Finished goods -15 -11 -12 -14 -10 -7 2 -6 -1 0 0 -7 -9 Versus a Year Ago (not seasonally adjusted)   Production -62 -52 -44 -50 -60 -46 -40 -31 -30 -10 -9 -1 14 Volume of shipments -60 -53 -45 -50 -57 -43 -40 -28 -31 -10 -11 -5 15 Volume of new orders -53 -47 -49 -48 -57 -43 -37 -16 -25 -11 -8 -3 19 Backlog of orders -56 -53 -47 -50 -52 -48 -44 -24 -32 -14 -19 -13 -3 Number of employees -60 -65 -54 -57 -66 -56 -47 -49 -48 -39 -29 -31 -18 Average employee workweek -49 -54 -44 -41 -50 -40 -33 -28 -32 -20 -11 -10 -1 Prices received for finished product -8 -8 -11 -24 -27 -14 -14 -12 -10 -1 -4 7 7 Prices paid for raw materials -16 -25 -20 -27 -17 -9 -5 -12 6 25 38 55 58 Capital expenditures -42 -48 -28 -24 -23 -24 -25 -26 -31 -14 -15 -8 -5 New orders for exports -22 -26 -17 -14 -16 -7 -6 -8 0 6 7 2 7 Supplier delivery time -13 -19 -17 -13 -8 1 -2 -3 0 -1 2 10 8 Inventories:      Materials -34 -38 -38 -43 -37 -37 -37 -34 -35 -18 -20 -17 -12 Inventories:      Finished goods -20 -20 -23 -23 -25 -17 -14 -24 -12 -14 -14 -11 -9 Expected in Six Months (seasonally adjusted)   Production 0 3 11 9 19 17 24 32 17 35 24 33 22 Volume of shipments 0 0 8 6 12 12 18 31 15 35 32 36 21 Volume of new orders 5 2 15 14 19 17 26 23 17 25 25 27 28 Backlog of orders -9 -9 0 6 7 0 13 16 7 12 5 16 9 Number of employees -19 -13 0 -11 -7 1 4 8 2 9 18 20 18 Average employee workweek -10 -11 3 -4 0 5 5 16 8 7 13 10 4 Prices received for finished product -7 -13 4 -10 -3 1 0 5 8 12 15 19 17 Prices paid for raw materials -6 -2 13 1 23 20 28 32 31 60 59 55 61 Capital expenditures -15 -11 -13 -12 -2 -8 -5 -1 0 14 3 5 11 New orders for exports -3 -3 2 6 6 7 10 9 11 13 12 5 11 Supplier delivery time -5 -5 -7 -7 -2 4 -1 6 10 6 6 9 15 Inventories:      Materials -25 -24 -18 -18 -13 -12 -6 -3 -2 3 6 4 3 Inventories:      Finished goods -19 -20 -9 -12 -15 -11 -7 -5 2 2 1 -4 0