September 2019 Kansas City Fed Manufacturing Drops Deeper Into Contraction

Of the four regional manufacturing surveys released for September, all were in expansion

Market expectations from Econoday were -4 to -1 (consensus -3). The reported value was ——. Any value below zero is in contraction.

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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 declined in August, while expectations for future activity edged higher.

“Regional factory activity had its largest monthly drop in over three years, and over 55 percent of firms expect negative impacts from the latest round of U.S. tariffs on Chinese goods,” said Wilkerson. “However, even though many firms expect trade tensions to persist, expectations for future shipments and exports expanded slightly.”

Factory Activity Declined in August

The month-over-month composite index was -6 in August, down from -1 in July and 0 in June, and the lowest reading since March 2016 (Table 1). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The drop in manufacturing activity was driven by declines at both durable and nondurable plants, but especially from decreases in primary metal, electrical equipment, appliances, paper, printing, and chemical manufacturing. Most month-over-month indexes decreased in August, and the shipments and supplier delivery time indexes also turned negative. All of the yearover-year factory indexes decreased in August, and the composite index fell from 11 to -1. On the other hand, the future composite index edged higher from 9 to 11, as expectations for shipments, order backlog, employment, and new orders for exports grew slightly.

Summary of all Federal Reserve Districts Manufacturing:

Richmond Fed (hyperlink to reports):

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Dallas Fed (hyperlink to reports):

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Philly Fed (hyperlink to reports):

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New York Fed (hyperlink to reports):

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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 (red bar) to the Kansas City Fed survey (light green bar).

Comparing Surveys to Hard Data:

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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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