The Kansas City Fed Manufacturing Index for August was down for a fifth month in a row at -6 from -1 in July and was the lowest since -7 in March 2016. Survey respondents’ comments point to two big problems: tariffs that make pricing and supply difficult, and a shortage of qualified labor. While the index for six months from now was more-or-less steady at 11 in August after 9 in July, it does not suggest that the region’s factory sector is anticipating any significant pick up in activity.
The survey details point to sharply weaker new orders (-16 in August after -2 in July, and the lowest since January 2016 at -26). Orders in the pipeline continued to weaken(-19 after -13), and shipments were declining (-7 after 0). Employment contracted for a second month in a row (-7 after -6) and probably led to an expansion of the workweek to make up the difference (7 after -4). Delivery times were shortening (-6 after 6) and inventories nudged higher (3 after 1).
Falling energy prices probably were the main factor behind the drop in prices paid (-2 in August after 15 in July) and the first negative since March 2016. Prices received reflected decreased pricing power (-3 after 2) and were the first negative since November 2016.
The Kansas City-ISM equivalent index was down to 45.8 in August from 49.1 in July. The calculation does not have the best correlation to the ISM Manufacturing Index , but it does agree with the Philadelphia-ISM equivalent in signaling softer manufacturing conditions in August at the national level.
Disclaimer: Whetstone Analysis provides commentary as a service to its subscribers. Whetstone Analysis is not responsible for, and expressly disclaims all liability for, damages of any kind arising out of use, reference to, or reliance on any information contained within the site. While the information contained within the site is periodically updated and every effort is made to ensure its accuracy, no guarantee is given that the information provided in this Web site is correct, complete, and up-to-date. Click here to read our full Disclaimer.