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posted on 21 May 2015

Kansas City Fed: Manufacturing Contraction Accelerates in May 2015

Of the three regional manufacturing surveys released to date for May, two show weak manufacturing growth one is in contraction.

The market was expecting a range between -2 to 1 (consensus -2) versus the actual at -13.

z kansas_man.PNG

TENTH DISTRICT MANUFACTURING ACTIVITY DECLINED MORE SHARPLY

Federal Reserve Bank of Kansas City Releases May Manufacturing Survey KANSAS CITY, Mo. The Federal Reserve Bank of Kansas City released the May Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined more sharply in May and producers' expectations also fell, with both reaching their lowest levels since mid-2009.

"Factories in our region saw an even sharper decline in May than in March or April, as exports fell further and energy-related producers saw another drop in orders," said Wilkerson. "However, firms' overall still plan a modest increase in employment over the next six to twelve months."

TENTH DISTRICT MANUFACTURING SUMMARY

Tenth District manufacturing activity declined more sharply in May than in previous months and producers' expectations also fell, with both reaching their lowest levels since mid-2009. However, most price indexes increased slightly, reversing a recent trend of decline. In a special question about hiring plans, the majority of firms indicated they were planning to either leave employment levels unchanged or increase them slightly over the next twelve months.

The month-over-month composite index was -13 in May, down from -7 in April and -4 in March (Tables 1 & 2, Chart). The last time the composite index was lower was in April 2009. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The overall slower growth was mostly attributable to declines in durable goods manufacturing, including a continued decline in aircraft production and further weakness in metals and machinery. In addition, several nondurable goods plants also reported sluggish activity, particularly for plastics and food production. Production fell most sharply in energy-producing states like Oklahoma and New Mexico, but it was also down in most other District states. The majority of other month-over-month indexes also decreased from the previous month. The production index contracted from -2 to -13, and the shipments and new orders indexes also fell. The order backlog, employment, and new orders for exports indexes edged higher but still remained well below zero. The finished goods inventory index increased from -1 to 0, while the raw materials inventory index dropped into negative territory.

Year-over-year factory indexes were mixed but remained negative overall. The composite year-over-year index inched lower from -3 to -5, and the production, shipments, new orders, and order backlog indexes also became more negative. The employment index rose from -8 to 0, while the capital expenditures and new orders for exports indexes were basically unchanged. The finished goods inventory index increased from 4 to 6, but the raw materials inventory index eased slightly.

Summary of all Federal Reserve Districts Manufacturing:

Richmond Fed (hyperlink to reports):

z richmond_man.PNG

Kansas Fed (hyperlink to reports):

z kansas_man.PNG

Dallas Fed (hyperlink to reports):

z dallas_man.PNG

Philly Fed (hyperlink to reports):

z philly fed1.PNG

New York Fed (hyperlink to reports):

z empire1.PNG

Federal Reserve Industrial Production - Actual Data (hyperlink to report):

Holding this and other survey's Econintersect follows accountable for their predictions, the following graph compares the hard data from Industrial Products manufacturing subindex (dark blue bar) and US Census manufacturing shipments (lighter blue bar) to the Kansas City Fed survey (light green bar).

Comparing Surveys to Hard Data:

z survey1.png

In the above graphic, hard data is the long bars, and surveys are the short bars. The arrows on the left side are the key to growth or contraction.

Steven Hansen



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