The Kansas City Fed Manufacturing Survey continued to decline in February, with the composite index remaining at -5, unchanged from January. Despite this, future expectations stayed positive, though they dipped slightly from 15 in January to 14 in February.
Here is an excerpt from the latest report:
The month-over-month composite index was -5 in February, unchanged from -5 in January and December (Tables 1 & 2). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The declines were driven more by nondurable manufacturing, particularly food, chemical, and paper manufacturing. All month-over-month indexes were negative, except for the price, inventories, and supplier delivery time indexes. Production, volume of shipments, and backlogs all decreased moderately. Employment levels declined somewhat following a few months of steady activity, decreasing from 1 to -14. All year-over-year indexes were negative, except the price indexes. The composite index declined -9 to -18 in February. Production and average employee workweek fell substantially, while backlogs and employment levels also decreased moderately. Capital expenditures continued to stay steady. The future composite index ticked down from 15 to 14 in February as expectations for new orders lowered slightly. However, firms continue to anticipate employment increases in the next six months.
Background on Kansas City Fed Manufacturing Survey
The Kansas City Fed Manufacturing Survey is a monthly survey of ~300 manufacturing plants that provides information on current manufacturing activity and future expectations in the tenth district (Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri). The composite manufacturing index is an average of indexes on production, new orders, employment, delivery time, and raw materials inventory. This is a diffusion index, meaning negative readings indicate contraction while positive ones indicate expansion. The survey offers clues on inflationary pressures and the pace of growth in the manufacturing sector for this region of the country and the accumulated results can help trace long-term trends.
