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First Cut: Kansas City Fed Manufacturing Index lowest since November 2016

The Kansas City Fed’s Manufacturing Index fell to 0 (zero) in June, the first time to reach that levels since 0 in November 2016. The index for six-month expectations was 11 in June, quite close to the prior two months of 12 in May and 11 in April. Survey respondents’ comments do not sound overly concerned about a deterioration in business conditions. There are concerns about supply chains and transportation, but it seems that finding and keeping skilled labor is foremost.

Overall the components would suggest a pause in expansionary conditions, but not necessarily a sustained deterioration.

The subindexes point to continued modest increases in new orders (5 in June after 4 in May) with reduced order backlogs (-7 after -5) and slower shipments (-7 after -2). However, the pace of employment is steady (5 in June in May), although the workweek was flat (0 after 2). Delivery times (-3 after 9) and inventories (-3 after 0) narrowed sharply.

The index for prices paid faded (9 in June after 13 in May) with a similar decline in prices received (3 after 15). It probable that energy prices were the main driver of the easing of price pressures.

The Kansas City-ISM equivalent index — calculated from the five components closest to the national report — was down to 51.0 in June from 52.4 in May. The Kansas City measure has a decent correspondence to the ISM Manufacturing Index and hints that expansion in the factory sector will be minimal when the report is issued at 10:00 ET on Monday, July 1.

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