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posted on 27 August 2015

Kansas City Fed: Manufacturing Contraction Continues in August 2015

Of the four regional manufacturing surveys released to date for August, one shows weak manufacturing growth, one shows no growth, and two are in contraction.

The market expected (from Bloomberg) expected the index values at -10 to 0 (consensus -4 versus the -9 reported.

z kansas_man.PNG

The Federal Reserve Bank of Kansas City released the August 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 continued to decline moderately, similar to the pace of the previous few months.

"Survey respondents reported that weak oil and gas activity along with a stronger dollar continued to weigh on regional factories", said Wilkerson. "Price indexes also fell after rising in recent months."


Tenth District manufacturing activity continued to decline moderately in August, similar to the pace of the previous few months. Producers cited weak oil and gas activity and the stronger dollar as key reasons for the continued decrease in activity. Most price indexes fell from the previous survey, with an actual decline in monthly price levels.

The month-over-month composite index was -9 in August, down from -7 in July and equal to -9 in June (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The decrease was mostly attributable to weaker nondurable goods manufacturing, led by a reduction in food, beverage, and plastics production. Durable goods production remained weak but stable, particularly for metals and machinery products. Production indexes fell in nearly all District states. The majority of other monthover-month indexes edged lower. The production index dropped from -5 to -16, and the new orders, shipments and order backlog indexes also declined moderately. On the other hand, the new orders index edged higher from -10 to -4, and the employment index rebounded slightly after falling considerably last month. The raw materials inventory index fell from -7 to -12, and the finished goods inventory index also decreased.

Year-over-year factory indexes were mixed but generally weaker than last month. The composite year-over-year index inched up from -10 to -9, and the employment index also moved higher from -16 to -4. The production index was unchanged at -20, while the shipments, new orders, and order backlog indexes decreased somewhat. The capital expenditures index moderated from 17 to 8, and the new orders for exports index fell further. The raw materials inventory index decreased from -1 to -5, while the finished goods inventory index moved into positive territory.

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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