January 2020 Kansas City Fed Manufacturing Remains In Contraction

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

Analyst Opinion of Kansas City Fed Manufacturing

Kansas City Fed manufacturing has been one of the more stable districts and their index even though below the range seen in the last 12 months. Note that the key internals were in contraction. This should be considered similar to last month.

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

(Click on image to enlarge)

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Tenth District manufacturing activity was nearly flat in January while expectations for future activity expanded (Chart 1). The month-over-month prices for raw materials increased, while prices for finished products declined from a month ago. District firms continued to expect higher prices in the next 6 months.

The month-over-month composite index was -1 in January, slightly higher than -5 in December and -2 in November (Table 1). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The slight decrease in district manufacturing activity was driven by declines in: nonmetallic mineral products, primary metal, fabricated metal products, computer and electronic products, beverage and tobacco products, and printing manufacturing, while several other industries improved. Most month-over-month indexes remained slightly negative in January, and inventories continued to decline. However, the month-over-month employment index rose back into positive territory for the first time in over six months and the supplier delivery time index was also slightly positive. Year-over-year factory indexes dropped further in January, and the composite decreased from -4 to -7. On the other hand, the future composite index grew from 9 to 14 in January.

"Regional factory activity was down only slightly in January, and firms reported a modest increase in employment," said Wilkerson. "Contacts reported slightly less difficulty finding workers than six months ago, but still over 60 percent of firms were experiencing labor shortages."

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