Kansas City Fed: Manufacturing activity rebounded moderately in July

Tenth District manufacturing activity rebounded moderately in July, and expectations for future production remained positive, the Federal Reserve Bank of Kansas City reported on July 29. However, plans for future hiring and capital spending were essentially flat. Price indexes were mostly unchanged.

The net percentage of firms reporting month-over-month increases in production in July was 14, up from 3 in June and 5 in May (Tables 1 & 2, Chart). The increase in production occurred among both durable and non-durable goods producing plants, with the exception of aircraft producers, who reported a slight downturn. Other month-over-month indicators generally increased as well. The shipments, new orders, and order backlog indexes continued to climb higher, and the employment index moved back into positive territory. In contrast, the new orders for exports index decreased from 3 to 0, and the supplier delivery time index also fell for the second straight month. The raw materials inventory index inched up from -4 to -1, while the finished goods inventory index edged down.

Year-over-year factory indexes rebounded strongly after slowing a bit last month. The production index increased from 9 to 25, its highest level in almost three years. The shipments, new orders, and order backlog indexes also recorded levels not seen since late 2007. The employment index edged higher from -12 to -10, and the capital expenditures index moved into positive territory for the first time in almost two years. In addition, the new orders for export index doubled from 7 to 14. The raw materials inventory index rose from -14 to -9, but the finished goods inventory index fell slightly.

Future factory activity indexes were mixed in July. The future production index edged up from 21 to 23, and the future new orders index remained unchanged. The future shipments and order backlog indexes eased somewhat, and the future employment index decreased from 9 to 1. The future capital expenditures index inched higher from -4 to -3, and the future new orders for exports index was stable at 5. Both inventory indexes increased slightly.

Most price indexes were largely unchanged. The month-over-month finished goods price index rose from -14 to -9, while the raw materials price index remained fixed at 14. The year-over-year raw materials price index fell from 53 to 50, and the finished goods price index also eased slightly. The future raw materials price index dropped from 40 to 26, and the future finished goods price index slowed slightly from 11 to 9, as only a modest number of firms continue to plan on passing recent cost increases through to customers.

 

Table1       Summary of Tenth District Manufacturing Conditions, July 2010   July vs. June (percent)1 July vs. Year Ago (percent)1 Expected in Six Months (percent)1 Plant Level Indicators Increase No Change Decrease Diff Index2 SA Index3 Increase No Change Decrease Diff Index2 Increase No Change Decrease Diff Index2 SA Index3   Production 37 39 21 15 14 50 24 24 25 44 35 17 26 23 Volume of shipments 37 37 25 12 12 53 18 28 25 43 35 18 25 22 Volume of new orders 34 39 25 9 9 48 24 25 23 43 35 19 24 23 Backlog of orders 26 49 22 4 -2 35 34 28 6 30 45 19 11 11 Number of employees 23 61 15 8 5 26 35 37 -10 29 45 24 5 1 Average employee workweek 20 64 15 5 1 28 48 22 5 23 54 21 1 0 Prices received for finished product 6 81 11 -4 -9 30 45 23 7 24 60 13 10 9 Prices paid for raw materials 35 54 9 25 14 62 24 11 50 45 40 10 34 26 Capital expenditures   31 39 27 4 21 55 22 0 -3 New orders for exports 12 67 7 5 0 22 55 8 14 15 66 5 9 5 Supplier delivery time 7 85 5 1 0 14 74 10 3 11 82 4 7 8 Inventories:            Materials 20 52 25 -5 -1 26 37 35 -9 20 54 25 -5 -8      Finished goods 17 60 18 0 0 23 40 28 -5 18 53 22 -4 -4 1Percentage may not add to 100 due to rounding. 2Diffusion Index. The diffusion index is calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. 3Seasonally Adjusted Diffusion Index. The month vs. month and expected-in-six-months diffusion indexes are seasonally adjusted using Census X-12. Note: The July survey included 120 responses from plants in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico, and western Missouri.

Table2 Historical Manufacturing Survey Indexes   Jul'09 Aug'09 Sep'09 Oct'09 Nov'09 Dec'09 Jan'10 Feb'10 Mar'10 Apr'10 May'10 Jun'10 Jul'10 Versus a Month Ago (seasonally adjusted)   Production 0 -5 12 5 15 7 13 19 18 24 5 3 14 Volume of shipments 4 -13 8 0 8 3 9 14 17 27 -3 1 12 Volume of new orders 6 -8 7 7 10 0 9 11 12 15 -2 0 9 Backlog of orders -11 -17 -10 -1 0 -4 0 -5 7 11 -3 -9 -2 Number of employees -15 -10 -3 -4 0 -1 2 -4 3 5 1 -1 5 Average employee workweek -13 -9 8 -3 4 0 4 -3 1 6 9 -2 1 Prices received for finished product -16 -12 -6 -6 1 -1 0 0 5 5 -1 -14 -9 Prices paid for raw materials -7 0 9 12 21 22 42 45 42 53 37 14 14 Capital expenditures n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a New orders for exports 0 0 2 3 2 5 6 0 4 5 0 3 0 Supplier delivery time -4 0 3 3 11 8 8 12 11 10 15 5 0 Inventories:      Materials -23 -20 -15 -4 -6 -12 -7 -1 3 -7 6 -4 -1 Inventories:      Finished goods -14 -10 -7 2 -6 -1 0 0 -7 -9 6 1 0 Versus a Year Ago (not seasonally adjusted)   Production -50 -60 -46 -40 -31 -30 -10 -9 -1 14 16 9 25 Volume of shipments -50 -57 -43 -40 -28 -31 -10 -11 -5 15 13 6 25 Volume of new orders -48 -57 -43 -37 -16 -25 -11 -8 -3 19 23 6 23 Backlog of orders -50 -52 -48 -44 -24 -32 -14 -19 -13 -3 0 -5 6 Number of employees -57 -66 -56 -47 -49 -48 -39 -29 -31 -18 -18 -12 -10 Average employee workweek -41 -50 -40 -33 -28 -32 -20 -11 -10 -1 8 -4 5 Prices received for finished product -24 -27 -14 -14 -12 -10 -1 -4 7 7 9 9 7 Prices paid for raw materials -27 -17 -9 -5 -12 6 25 38 55 58 63 53 50 Capital expenditures -24 -23 -24 -25 -26 -31 -14 -15 -8 -5 -5 -5 4 New orders for exports -14 -16 -7 -6 -8 0 6 7 2 7 8 7 14 Supplier delivery time -13 -8 1 -2 -3 0 -1 2 10 8 10 0 3 Inventories:      Materials -43 -37 -37 -37 -34 -35 -18 -20 -17 -12 -14 -14 -9 Inventories:      Finished goods -23 -25 -17 -14 -24 -12 -14 -14 -11 -9 -8 -4 -5 Expected in Six Months (seasonally adjusted)   Production 9 19 17 24 32 17 35 24 33 22 32 21 23 Volume of shipments 6 12 12 18 31 15 35 32 36 21 33 24 22 Volume of new orders 14 19 17 26 23 17 25 25 27 28 31 23 23 Backlog of orders 6 7 0 13 16 7 12 5 16 9 16 12 11 Number of employees -11 -7 1 4 8 2 9 18 20 18 14 9 1 Average employee workweek -4 0 5 5 16 8 7 13 10 4 13 2 0 Prices received for finished product -10 -3 1 0 5 8 12 15 19 17 17 11 9 Prices paid for raw materials 1 23 20 28 32 31 60 59 55 61 45 40 26 Capital expenditures -12 -2 -8 -5 -1 0 14 3 5 11 5 -4 -3 New orders for exports 6 6 7 10 9 11 13 12 5 11 7 5 5 Supplier delivery time -7 -2 4 -1 6 10 6 6 9 15 9 0 8 Inventories:      Materials -18 -13 -12 -6 -3 -2 3 6 4 3 -10 -10 -8 Inventories:      Finished goods -12 -15 -11 -7 -5 2 2 1 -4 0 -6 -11 -4