Kansas City Fed: Manufacturing activity increased in November

Growth in Tenth District manufacturing activity increased in November, and producers remained optimistic about future activity, said the Federal Reserve Bank of Kansas City in a report released on November 24. Price indexes in the survey continued to edge higher, particularly for raw materials.

The net percentage of firms reporting month-over-month increases in production in November was 21, up from 10 in October and 14 in September (Tables 1 & 2, Chart). The increase in production occurred among both durable and nondurable goods producing plants, with a sharp rise in machinery, high-tech, printing, and transportation equipment activity partly due to higher export orders. All other month-over-month indicators also improved from the previous month. The shipments, new orders, and order backlog indexes climbed higher, and the employment index reached its highest level since late 2007. The new orders for exports index rose from 0 to 11, and both inventory indexes moved into positive territory.

Year-over-year factory indexes also improved in November. The production index increased from 7 to 27, and the shipments, new orders, and order backlog indexes also edged higher. The employment index moved into positive territory for the first time since early 2008, and the capital expenditures index jumped from 0 to 9. Both inventory indexes rose to 0, after nearly two years of negative readings.

Future factory activity was somewhat mixed, but levels still remained solid for most indexes. The future production index eased from 29 to 23, and the future shipments and new order indexes also fell modestly. In contrast, the future employment index rose from 7 to 13, and the future capital expenditures index rebounded after falling last month. The future new orders for exports and supplier delivery time indexes remained basically unchanged. The raw materials inventory index increased from -5 to -1, and the finished goods inventory index also improved from -16 to -5.

Most price indexes continued to rise. The month-over-month finished goods price moved up only slightly from 2 to 3, and the raw materials price index increased from 25 to 35. The year-over-year finished goods price index dropped from 18 to 15, but the raw materials price index climbed higher for the second straight month. The future raw materials price index jumped from 47 to 61, and the future finished goods price index also increased, as slightly more firms plan to pass recent cost increases through to customers.

 

Table1       Summary of Tenth District Manufacturing Conditions, November 2010   November vs. October (percent)1 November 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 21 50 27 22 27 45 30 22 23 23 Volume of shipments 30 43 24 6 12 50 27 20 29 45 32 20 25 23 Volume of new orders 41 34 23 18 25 51 23 23 28 45 33 21 23 20 Backlog of orders 28 46 23 4 8 33 38 23 10 25 54 16 8 11 Number of employees 20 66 12 7 10 34 37 28 6 31 50 18 12 13 Average employee workweek 17 64 17 0 5 32 45 21 10 18 62 19 0 0 Prices received for finished product 9 80 9 0 3 37 41 21 15 38 48 12 26 27 Prices paid for raw materials 37 57 4 33 35 69 22 7 62 65 31 3 62 61 Capital expenditures   33 41 23 9 31 49 17 13 12 New orders for exports 16 66 7 8 11 27 54 8 19 19 65 4 14 15 Supplier delivery time 12 84 1 11 11 20 73 4 16 13 83 1 12 10 Inventories:            Materials 20 56 22 -1 0 30 37 31 0 20 55 23 -2 -1      Finished goods 17 61 18 0 2 27 40 27 0 16 58 22 -6 -5 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 November survey included 124 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Table2 Historical Manufacturing Survey Indexes   Nov'09 Dec'09 Jan'10 Feb'10 Mar'10 Apr'10 May'10 Jun'10 Jul'10 Aug'10 Sep'10 Oct'10 Nov'10 Versus a Month Ago (seasonally adjusted)   Production 15 7 13 19 18 24 5 3 14 0 14 10 21 Volume of shipments 8 3 9 14 17 27 -3 1 12 -6 15 6 12 Volume of new orders 10 0 9 11 12 15 -2 0 9 -13 9 16 25 Backlog of orders 0 -4 0 -5 7 11 -3 -9 -2 -16 4 4 8 Number of employees 0 -1 2 -4 3 5 1 -1 5 -2 -2 -1 10 Average employee workweek 4 0 4 -3 1 6 9 -2 1 -6 2 2 5 Prices received for finished product 1 -1 0 0 5 5 -1 -14 -9 -4 -1 2 3 Prices paid for raw materials 21 22 42 45 42 53 37 14 14 14 25 25 35 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 5 6 0 4 5 0 3 0 -1 10 0 11 Supplier delivery time 11 8 8 12 11 10 15 5 0 3 4 1 11 Inventories:      Materials -6 -12 -7 -1 3 -7 6 -4 -1 6 -1 -10 0 Inventories:      Finished goods -6 -1 0 0 -7 -9 6 1 0 2 5 -13 2 Versus a Year Ago (not seasonally adjusted)   Production -31 -30 -10 -9 -1 14 16 9 25 18 22 7 27 Volume of shipments -28 -31 -10 -11 -5 15 13 6 25 18 25 12 29 Volume of new orders -16 -25 -11 -8 -3 19 23 6 23 16 20 8 28 Backlog of orders -24 -32 -14 -19 -13 -3 0 -5 6 3 4 0 10 Number of employees -49 -48 -39 -29 -31 -18 -18 -12 -10 -8 -2 -8 6 Average employee workweek -28 -32 -20 -11 -10 -1 8 -4 5 9 6 -1 10 Prices received for finished product -12 -10 -1 -4 7 7 9 9 7 7 11 18 15 Prices paid for raw materials -12 6 25 38 55 58 63 53 50 51 48 58 62 Capital expenditures -26 -31 -14 -15 -8 -5 -5 -5 4 -9 0 0 9 New orders for exports -8 0 6 7 2 7 8 7 14 12 12 7 19 Supplier delivery time -3 0 -1 2 10 8 10 0 3 4 7 7 16 Inventories:      Materials -34 -35 -18 -20 -17 -12 -14 -14 -9 -5 -3 -3 0 Inventories:      Finished goods -24 -12 -14 -14 -11 -9 -8 -4 -5 -8 -2 -7 0 Expected in Six Months (seasonally adjusted)   Production 32 17 35 24 33 22 32 21 23 10 23 29 23 Volume of shipments 31 15 35 32 36 21 33 24 22 9 19 29 23 Volume of new orders 23 17 25 25 27 28 31 23 23 16 28 26 20 Backlog of orders 16 7 12 5 16 9 16 12 11 4 23 7 11 Number of employees 8 2 9 18 20 18 14 9 1 2 7 7 13 Average employee workweek 16 8 7 13 10 4 13 2 0 -2 6 1 0 Prices received for finished product 5 8 12 15 19 17 17 11 9 7 10 18 27 Prices paid for raw materials 32 31 60 59 55 61 45 40 26 30 40 47 61 Capital expenditures -1 0 14 3 5 11 5 -4 -3 -4 8 4 12 New orders for exports 9 11 13 12 5 11 7 5 5 7 12 14 15 Supplier delivery time 6 10 6 6 9 15 9 0 8 6 3 9 10 Inventories:      Materials -3 -2 3 6 4 3 -10 -10 -8 -6 -2 -5 -1 Inventories:      Finished goods -5 2 2 1 -4 0 -6 -11 -4 0 -3 -16 -5