December 2019 Kansas City Fed Manufacturing Remains In Contraction

Of the three regional manufacturing surveys released for December, two were in expansion and one was in contraction.

Market expectations from Econoday were —- to —- (consensus —). The reported value was -8. Any value below zero is in contraction.

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The Federal Reserve Bank of Kansas City released the December 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 decreased further in December while expectations for future activity remained positive.

“Regional factory activity declined for the sixth straight month in December, driven again by weaker activity in durable goods manufacturing,” said Wilkerson. “About half of District firms said weakening in other goods-producing sectors (such as energy and agriculture) has negatively affected business in their area.”

Tenth District manufacturing activity decreased further in December while expectations for future activity remained positive (Chart 1). The month-over-month prices for raw materials increased, while prices for finished products eased slightly from a month ago. District firms expected higher prices in the next 6 months.

Factory Activity Decreased Further in December

The month-over-month composite index was -8 in December, down from -3 in both November and October (Table 1). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The decrease in district manufacturing activity continued to be driven by weak activity at durable goods plants, especially from declines in: wood products, nonmetallic mineral products, primary metal, fabricated metal products, machinery, and computer and electronic products manufacturing. Most month-over-month indexes fell in December. The shipments index turned negative and the production, new orders, order backlog, and employment indexes declined further. Aside from the index for raw materials prices, only the supplier delivery time index remained slightly positive. Year-over-year factory indexes also dipped in December, and the composite slowed from 6 to -4. The future composite index moderated from 15 to 10 in December, but remained positive.

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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