March 2019 Kansas City Fed Manufacturing In Contraction Due To COVID-19 Impact

Of the four regional manufacturing surveys released for March, three were in contraction with one in expansion.

Market expectations from Econoday were —- to —- (consensus —). The reported value was -17. Any value below zero is in contraction.

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Tenth District manufacturing activity declined sharply compared with a month ago, and expectations for future activity fell to levels last seen in early 2009 (Chart 1 & Table 1). Month-over-month price indexes decreased moderately, and District firms expected lower prices in the next 6 months

Factory Activity Declined Sharply in March

The month-over-month composite index was -17 in March, the lowest composite reading since April 2009, and down considerably from 5 in February and -1 in January (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 was across both durable and non-durable goods plants. All month-over-month indexes except for supplier delivery time were negative in March, and many indexes dropped to the lowest levels since 2015 or 2009. Year-over-year factory indexes also declined, and the composite index fell from 5 to -12. The future composite index dropped significantly from 16 to -19.

According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City:

“Regional factory activity contracted sharply in March as firms were negatively impacted by COVID-19. Many firms indicated overall demand and sales have slowed dramatically, with capital investments being put on hold. Around 60 percent of manufacturers faced delayed payments from customers and 54 percent had concerns about cash availability.”

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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