Kansas City Fed: Manufacturing activity growth, optimism slips back

Growth in Tenth District manufacturing activity eased slightly in June, and producers were somewhat less optimistic than in previous months, the Kansas City Federal Reserve announced in a report released on June 24. Price indexes fell from the previous month, with considerable easement in current materials prices and some slowing in finished goods price increases.

The net percentage of firms reporting month-over-month increases in production in June was 3, down from 5 in May and 24 in April (Tables 1 & 2, Chart). The slowdown in production growth was highest among food, chemicals, and metals producers, while many plants that produce heavy equipment and machinery reported a rise in activity. Other month-over-month indicators were mixed. The shipments and new orders indexes climbed back into positive territory, and the new orders for exports index increased from 0 to 3. In contrast, the employment index dropped from 1 to -1, and the order backlog index recorded its lowest level in almost a year. The supplier delivery time index fell back down after reaching a six-year high last month. Both inventory indexes decreased back into negative territory.

Growth in year-over-year factory indexes slowed after considerable gains the past several months. The production index eased from 16 to 9, and the shipments, new orders, order backlog, and new orders for exports indexes also fell. In contrast, the employment index inched higher from -18 to -12, and the capital expenditures index has remained unchanged for the last three months. The finished goods inventory index rose from -8 to -4, while the raw materials inventory index was unchanged.

Future factory activity indexes also decreased in June. The future production index fell from 32 to 21, and growth in the future shipments, new orders, and order backlog indexes also slowed. The future employment index eased from 14 to 9, and the future capital expenditures decreased to its lowest level since late 2009. The future finished goods inventory index fell from -6 to -11, while the future raw materials inventory index remained unchanged.

Price indexes edged down from the previous month. The month-over-month raw materials price index decreased from 37 to 14, and the finished goods price index fell to its lowest level in a year. The year-over-year raw materials price index eased from 63 to 53, while the finished goods price index was unchanged. The future raw materials price index decreased from 45 to 40, and the future finished goods price index slowed from 17 to 11, as a modest number of firms continue to plan on passing recent cost increases through to customers.


 

Table1       Summary of Tenth District Manufacturing Conditions, June 2010   June vs. May (percent)1 June 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 33 45 20 12 3 44 19 34 9 42 37 19 23 21 Volume of shipments 34 36 28 6 1 43 17 37 6 46 33 19 27 24 Volume of new orders 33 36 28 4 0 42 18 36 6 42 38 17 25 23 Backlog of orders 22 47 28 -5 -9 30 29 36 -5 28 50 16 12 12 Number of employees 23 59 16 6 -1 25 35 38 -12 28 48 19 9 9 Average employee workweek 18 63 17 0 -2 21 50 25 -4 18 63 16 1 2 Prices received for finished product 7 77 14 -6 -14 32 42 23 9 23 65 9 14 11 Prices paid for raw materials 36 52 9 26 14 63 23 9 53 52 40 4 47 40 Capital expenditures   23 44 28 -5 19 54 20 -1 -4 New orders for exports 9 72 4 4 3 19 54 11 7 14 63 9 5 5 Supplier delivery time 12 80 4 8 5 14 67 14 0 10 75 9 1 0 Inventories:            Materials 22 52 24 -2 -4 24 34 38 -14 16 58 22 -5 -10      Finished goods 20 56 19 0 1 23 44 28 -4 14 58 23 -9 -11 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 June survey included 121 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Table2 Historical Manufacturing Survey Indexes   Jun'09 Jul'09 Aug'09 Sep'09 Oct'09 Nov'09 Dec'09 Jan'10 Feb'10 Mar'10 Apr'10 May'10 Jun'10 Versus a Month Ago (seasonally adjusted)   Production 1 0 -5 12 5 15 7 13 19 18 24 5 3 Volume of shipments 4 4 -13 8 0 8 3 9 14 17 27 -3 1 Volume of new orders 8 6 -8 7 7 10 0 9 11 12 15 -2 0 Backlog of orders -1 -11 -17 -10 -1 0 -4 0 -5 7 11 -3 -9 Number of employees -14 -15 -10 -3 -4 0 -1 2 -4 3 5 1 -1 Average employee workweek 2 -13 -9 8 -3 4 0 4 -3 1 6 9 -2 Prices received for finished product -14 -16 -12 -6 -6 1 -1 0 0 5 5 -1 -14 Prices paid for raw materials -9 -7 0 9 12 21 22 42 45 42 53 37 14 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 -2 0 0 2 3 2 5 6 0 4 5 0 3 Supplier delivery time -3 -4 0 3 3 11 8 8 12 11 10 15 5 Inventories:      Materials -22 -23 -20 -15 -4 -6 -12 -7 -1 3 -7 6 -4 Inventories:      Finished goods -12 -14 -10 -7 2 -6 -1 0 0 -7 -9 6 1 Versus a Year Ago (not seasonally adjusted)   Production -44 -50 -60 -46 -40 -31 -30 -10 -9 -1 14 16 9 Volume of shipments -45 -50 -57 -43 -40 -28 -31 -10 -11 -5 15 13 6 Volume of new orders -49 -48 -57 -43 -37 -16 -25 -11 -8 -3 19 23 6 Backlog of orders -47 -50 -52 -48 -44 -24 -32 -14 -19 -13 -3 0 -5 Number of employees -54 -57 -66 -56 -47 -49 -48 -39 -29 -31 -18 -18 -12 Average employee workweek -44 -41 -50 -40 -33 -28 -32 -20 -11 -10 -1 8 -4 Prices received for finished product -11 -24 -27 -14 -14 -12 -10 -1 -4 7 7 9 9 Prices paid for raw materials -20 -27 -17 -9 -5 -12 6 25 38 55 58 63 53 Capital expenditures -28 -24 -23 -24 -25 -26 -31 -14 -15 -8 -5 -5 -5 New orders for exports -17 -14 -16 -7 -6 -8 0 6 7 2 7 8 7 Supplier delivery time -17 -13 -8 1 -2 -3 0 -1 2 10 8 10 0 Inventories:      Materials -38 -43 -37 -37 -37 -34 -35 -18 -20 -17 -12 -14 -14 Inventories:      Finished goods -23 -23 -25 -17 -14 -24 -12 -14 -14 -11 -9 -8 -4 Expected in Six Months (seasonally adjusted)   Production 11 9 19 17 24 32 17 35 24 33 22 32 21 Volume of shipments 8 6 12 12 18 31 15 35 32 36 21 33 24 Volume of new orders 15 14 19 17 26 23 17 25 25 27 28 31 23 Backlog of orders 0 6 7 0 13 16 7 12 5 16 9 16 12 Number of employees 0 -11 -7 1 4 8 2 9 18 20 18 14 9 Average employee workweek 3 -4 0 5 5 16 8 7 13 10 4 13 2 Prices received for finished product 4 -10 -3 1 0 5 8 12 15 19 17 17 11 Prices paid for raw materials 13 1 23 20 28 32 31 60 59 55 61 45 40 Capital expenditures -13 -12 -2 -8 -5 -1 0 14 3 5 11 5 -4 New orders for exports 2 6 6 7 10 9 11 13 12 5 11 7 5 Supplier delivery time -7 -7 -2 4 -1 6 10 6 6 9 15 9 0 Inventories:      Materials -18 -18 -13 -12 -6 -3 -2 3 6 4 3 -10 -10 Inventories:      Finished goods -9 -12 -15 -11 -7 -5 2 2 1 -4 0 -6 -11